1 00:00:00,090 --> 00:00:02,430 The following content is provided under a Creative 2 00:00:02,430 --> 00:00:03,820 Commons license. 3 00:00:03,820 --> 00:00:06,030 Your support will help MIT open courseware 4 00:00:06,030 --> 00:00:10,120 continue to offer high quality educational resources for free. 5 00:00:10,120 --> 00:00:12,660 To make a donation, or to view additional materials 6 00:00:12,660 --> 00:00:16,620 from hundreds of MIT courses, visit MIT OpenCourseWare 7 00:00:16,620 --> 00:00:17,992 at ocw.mit.edu. 8 00:00:22,670 --> 00:00:25,810 WILLIAM BONVILLIAN: So I'm just putting In-Q-Tel out 9 00:00:25,810 --> 00:00:29,530 there as probably the most extreme example 10 00:00:29,530 --> 00:00:35,630 of governmental willingness to intervene in territories 11 00:00:35,630 --> 00:00:37,690 we thought the government really wouldn't do. 12 00:00:37,690 --> 00:00:39,340 Right? 13 00:00:39,340 --> 00:00:45,870 And, again, it's an example of this national security state 14 00:00:45,870 --> 00:00:48,930 doctrine that David Hart told us about. 15 00:00:48,930 --> 00:00:53,350 Whatever is needed for national security, we're going to do, 16 00:00:53,350 --> 00:00:55,030 however interventionist it might be. 17 00:00:55,030 --> 00:00:56,690 And this is a good example. 18 00:00:56,690 --> 00:01:00,790 So Ruth David, a very talented former CIA Director 19 00:01:00,790 --> 00:01:04,720 for Science and Technology, comes up 20 00:01:04,720 --> 00:01:12,650 with the idea of creating this entity to sponsor IT research. 21 00:01:12,650 --> 00:01:15,540 Because the CIA realized it was falling behind. 22 00:01:15,540 --> 00:01:17,810 It wasn't part of the IT revolution. 23 00:01:17,810 --> 00:01:20,172 It didn't understand, wasn't a participant, 24 00:01:20,172 --> 00:01:22,130 and yet it was going to be absolutely critical. 25 00:01:22,130 --> 00:01:25,075 And, of course, virtually no day passes 26 00:01:25,075 --> 00:01:26,450 without reading in the newspapers 27 00:01:26,450 --> 00:01:30,110 about some latest cyber security set of issues. 28 00:01:30,110 --> 00:01:36,440 So In-Q-Tel is set up as a government venture capital 29 00:01:36,440 --> 00:01:41,030 firm, a completely unique model. 30 00:01:41,030 --> 00:01:45,730 And it's aimed at early stage technology development. 31 00:01:45,730 --> 00:01:49,780 So the CIA is not new to technology development. 32 00:01:49,780 --> 00:01:53,710 I mean, in aerospace, the U2 and SR-71 blackbird 33 00:01:53,710 --> 00:01:58,920 are two of the most famous and spectacular aircraft ever put 34 00:01:58,920 --> 00:01:59,420 together. 35 00:01:59,420 --> 00:02:03,560 They were put together by Lockheed skunk works. 36 00:02:03,560 --> 00:02:08,840 But In-Q-Tel really is a very different model. 37 00:02:08,840 --> 00:02:16,280 So Norm Augustine, who had been CEO of Lockheed-- 38 00:02:16,280 --> 00:02:20,000 and is the winner of the president's National Medal 39 00:02:20,000 --> 00:02:22,370 of Technology, by the way, so a great technologist 40 00:02:22,370 --> 00:02:25,660 in his own right-- 41 00:02:25,660 --> 00:02:27,660 he helps in the founding of this. 42 00:02:27,660 --> 00:02:31,140 And they pick a CEO right out of Silicon Valley. 43 00:02:31,140 --> 00:02:35,790 And they've got a board with ties to IT innovators, 44 00:02:35,790 --> 00:02:38,850 as well as economic researchers, and VC firms, 45 00:02:38,850 --> 00:02:40,570 and tech companies. 46 00:02:40,570 --> 00:02:47,750 So In-Q-Tel is allowed to enter into joint ventures, i.e. 47 00:02:47,750 --> 00:02:51,620 In effect, it can co-own the companies 48 00:02:51,620 --> 00:02:55,040 that it's nurturing to bring along IT technologies 49 00:02:55,040 --> 00:02:57,650 that the CIA is going to be interested in. 50 00:02:57,650 --> 00:03:00,170 It can use sole source grants. 51 00:03:00,170 --> 00:03:02,240 It can set up open competitions. 52 00:03:02,240 --> 00:03:05,330 It can award sole source development contracts. 53 00:03:05,330 --> 00:03:07,610 It's got a set of powers here that are really quite 54 00:03:07,610 --> 00:03:10,700 interventionist in the model. 55 00:03:10,700 --> 00:03:13,420 And the CIA itself doesn't review its business deals. 56 00:03:13,420 --> 00:03:16,340 It's because it's a bit offshore. 57 00:03:16,340 --> 00:03:20,930 So it collaborates with the CIA, but it's independent of it. 58 00:03:20,930 --> 00:03:23,183 It has this set of characteristics. 59 00:03:23,183 --> 00:03:25,100 And we're going to talk more about these kinds 60 00:03:25,100 --> 00:03:27,500 of characteristics when we do the great groups 61 00:03:27,500 --> 00:03:31,370 class, the seventh class. 62 00:03:31,370 --> 00:03:34,850 But agile, problem-driven, solutions-focused, 63 00:03:34,850 --> 00:03:40,340 team-oriented, technology aware, output measured, innovative. 64 00:03:40,340 --> 00:03:44,930 These are all kind of characteristics 65 00:03:44,930 --> 00:03:48,260 that In-Q-Tel likes to say that it's capable of. 66 00:03:48,260 --> 00:03:50,370 And these are some of the technology areas 67 00:03:50,370 --> 00:03:54,560 that In-Q-Tel, in its earlier stages, worked on. 68 00:03:54,560 --> 00:03:59,600 So a whole suite of IT-related and software-related tech 69 00:03:59,600 --> 00:04:01,200 capabilities. 70 00:04:01,200 --> 00:04:07,170 So that's the model, and it's different. 71 00:04:07,170 --> 00:04:09,930 So, Chris, do you want to bring us through it quickly. 72 00:04:12,720 --> 00:04:14,670 CHRIS: So this is a pretty unique situation. 73 00:04:14,670 --> 00:04:17,519 Basically, it's kind of posed as a win-win. 74 00:04:17,519 --> 00:04:21,390 Like the CIA gets new tech that they are kind of 75 00:04:21,390 --> 00:04:23,400 behind in producing. 76 00:04:23,400 --> 00:04:26,430 And then, these tech companies, or In-Q-Tel, 77 00:04:26,430 --> 00:04:28,320 has the opportunity to get exposure 78 00:04:28,320 --> 00:04:32,550 to potential big next problems that they could develop 79 00:04:32,550 --> 00:04:34,970 commercial products for. 80 00:04:34,970 --> 00:04:38,460 So one question that was posed was, 81 00:04:38,460 --> 00:04:40,530 are there other such private enterprises 82 00:04:40,530 --> 00:04:41,980 funded by the government? 83 00:04:41,980 --> 00:04:44,370 And if not, what is preventing these partnerships 84 00:04:44,370 --> 00:04:46,900 from happening. 85 00:04:46,900 --> 00:04:49,770 I think Bill mentioned that the Supreme unique case 86 00:04:49,770 --> 00:04:51,900 so, probably, I don't think there's 87 00:04:51,900 --> 00:04:53,610 any other such partnerships. 88 00:04:53,610 --> 00:04:58,020 But why is that, maybe? 89 00:04:58,020 --> 00:04:59,730 AUDIENCE: They're still around, are they? 90 00:04:59,953 --> 00:05:01,120 WILLIAM BONVILLIAN: Oh yeah. 91 00:05:01,120 --> 00:05:04,140 AUDIENCE: They re-branded as IQT. 92 00:05:04,140 --> 00:05:05,305 AUDIENCE: Ah, thank you. 93 00:05:09,960 --> 00:05:15,017 I do remember there was one, maybe it was similar to DARPA, 94 00:05:15,017 --> 00:05:17,100 I remember in DARPA, at least in the next reading, 95 00:05:17,100 --> 00:05:19,530 there was something that was similar. 96 00:05:19,530 --> 00:05:20,470 Oh, that's right. 97 00:05:20,470 --> 00:05:22,650 So I remember that one of the points they mentioned 98 00:05:22,650 --> 00:05:24,150 in this reading, there was some sort 99 00:05:24,150 --> 00:05:26,850 of licensing that corporations needed 100 00:05:26,850 --> 00:05:28,503 to work with the government. 101 00:05:28,503 --> 00:05:29,670 Do you remember what it was? 102 00:05:29,670 --> 00:05:30,503 Like, FRC licensing. 103 00:05:30,503 --> 00:05:32,587 AUDIENCE: I think we were just talking about that. 104 00:05:32,587 --> 00:05:34,920 Like, level of strictness of the contracts. 105 00:05:34,920 --> 00:05:37,870 And how In-Q-Tel works to restructure 106 00:05:37,870 --> 00:05:41,583 how that contract works so that they could encourage smaller 107 00:05:41,583 --> 00:05:43,000 companies that didn't want to deal 108 00:05:43,000 --> 00:05:46,385 with overwhelming bureaucracy to join the party. 109 00:05:46,385 --> 00:05:47,510 WILLIAM BONVILLIAN: Thanks. 110 00:05:47,510 --> 00:05:47,930 [INAUDIBLE] 111 00:05:47,930 --> 00:05:48,430 Good. 112 00:05:51,250 --> 00:05:55,510 AUDIENCE: I was going to say, I think agencies similar 113 00:05:55,510 --> 00:05:58,480 to In-Q-Tel might be a hard sell, 114 00:05:58,480 --> 00:06:00,880 because if you think about-- 115 00:06:00,880 --> 00:06:05,080 they probably have a pretty large employee base, 116 00:06:05,080 --> 00:06:09,355 and they're privy to information leak. 117 00:06:12,070 --> 00:06:14,090 Also, it's going-- kind of directly 118 00:06:14,090 --> 00:06:19,223 flying in the face of our aversion to industrial policy. 119 00:06:19,223 --> 00:06:20,890 So we are picking winners, in this case. 120 00:06:20,890 --> 00:06:23,290 So those two things I think make it really difficult 121 00:06:23,290 --> 00:06:25,762 to have other agencies like this ourselves. 122 00:06:25,762 --> 00:06:27,970 WILLIAM BONVILLIAN: Right, because really, in effect, 123 00:06:27,970 --> 00:06:30,260 In-Q-Tel is a venture capital firm. 124 00:06:30,260 --> 00:06:31,882 It's not doing its own research. 125 00:06:31,882 --> 00:06:33,340 It's a venture capitalist, and it's 126 00:06:33,340 --> 00:06:36,940 taking positions in companies and helping 127 00:06:36,940 --> 00:06:40,150 drive those companies towards technology work 128 00:06:40,150 --> 00:06:45,828 that's going to be relevant to concerns that the CIA has got. 129 00:06:45,828 --> 00:06:46,370 Sorry, Chris. 130 00:06:46,370 --> 00:06:47,540 Go ahead. 131 00:06:47,540 --> 00:06:48,370 CHLOE: Oh, no, I-- 132 00:06:48,370 --> 00:06:49,620 WILLIAM BONVILLIAN: Oh, Chloe. 133 00:06:52,420 --> 00:06:55,600 CHLOE: I think it's interesting to think about why this would 134 00:06:55,600 --> 00:06:57,100 or wouldn't work for other agencies, 135 00:06:57,100 --> 00:06:58,475 because personally, I'm surprised 136 00:06:58,475 --> 00:07:01,930 that it has been such a successful model for the CIA, 137 00:07:01,930 --> 00:07:05,440 of all government agencies, on several levels. 138 00:07:05,440 --> 00:07:07,120 The article says that they didn't 139 00:07:07,120 --> 00:07:09,950 deal with any classified work or contracts, 140 00:07:09,950 --> 00:07:12,340 but I don't understand how such a firm could 141 00:07:12,340 --> 00:07:15,400 exist in partnership with an agency that does any classified 142 00:07:15,400 --> 00:07:16,150 work. 143 00:07:16,150 --> 00:07:19,110 I don't see how-- 144 00:07:19,110 --> 00:07:20,620 I'm surprised that that happened. 145 00:07:20,620 --> 00:07:24,100 I am surprised, also, a bit that that was able to-- 146 00:07:24,100 --> 00:07:24,640 yeah. 147 00:07:24,640 --> 00:07:25,430 Start with that. 148 00:07:25,430 --> 00:07:27,790 AUDIENCE: Which part are you surprised by-- the fact 149 00:07:27,790 --> 00:07:30,610 that they work so much on non-classified stuff? 150 00:07:30,610 --> 00:07:31,200 CHLOE: No, no. 151 00:07:31,200 --> 00:07:31,790 They didn't. 152 00:07:31,790 --> 00:07:32,870 In-Q-Tel, at least-- 153 00:07:32,870 --> 00:07:33,520 WILLIAM BONVILLIAN: Yeah, they didn't 154 00:07:33,520 --> 00:07:34,562 work on classified stuff. 155 00:07:34,562 --> 00:07:35,950 CHLOE: So I'm surprised that-- 156 00:07:35,950 --> 00:07:37,907 I think, of all agencies that I think 157 00:07:37,907 --> 00:07:40,240 this model could work for, I'm surprised that it works-- 158 00:07:40,240 --> 00:07:40,720 AUDIENCE: For someone who-- 159 00:07:40,720 --> 00:07:41,496 CHLOE: --the CIA. 160 00:07:41,496 --> 00:07:42,460 AUDIENCE: --who compartmentalizes 161 00:07:42,460 --> 00:07:43,210 their information. 162 00:07:43,210 --> 00:07:45,380 CHLOE: Yeah, compartmentalizes information. 163 00:07:45,380 --> 00:07:47,505 They were probably-- they mentioned also, oh, there 164 00:07:47,505 --> 00:07:48,922 will definitely be people who will 165 00:07:48,922 --> 00:07:50,530 raise questions about ethics concerns 166 00:07:50,530 --> 00:07:54,993 and the government meddling in funding technologies 167 00:07:54,993 --> 00:07:56,660 that they might simply be interested in. 168 00:07:56,660 --> 00:08:02,098 And feel like the CIA is just the worst possible-- 169 00:08:02,098 --> 00:08:02,890 AUDIENCE: Customer? 170 00:08:02,890 --> 00:08:04,390 CHLOE: Yeah. 171 00:08:04,390 --> 00:08:05,670 It's really surprising to me. 172 00:08:05,670 --> 00:08:07,420 AUDIENCE: I think-- yeah, it's really cool 173 00:08:07,420 --> 00:08:10,060 that it works, and also kind of shows that private enterprise 174 00:08:10,060 --> 00:08:11,453 work with government. 175 00:08:11,453 --> 00:08:13,870 Private enterprise has a strong incentive to move quickly, 176 00:08:13,870 --> 00:08:15,828 but I also think it's a case study in terms of, 177 00:08:15,828 --> 00:08:17,170 it was an IT revolution. 178 00:08:17,170 --> 00:08:20,020 Their business is information like information in general. 179 00:08:20,020 --> 00:08:22,775 And if anybody's kind of better than us, then we're screwed. 180 00:08:22,775 --> 00:08:24,400 So they're like, we really need to win. 181 00:08:24,400 --> 00:08:25,317 We really need to win. 182 00:08:25,317 --> 00:08:26,740 So I think there's a strong stress 183 00:08:26,740 --> 00:08:28,030 to actually make it work. 184 00:08:28,030 --> 00:08:29,810 So there's probably a lot of issues. 185 00:08:29,810 --> 00:08:31,780 And I'll look from a management perspective, a lot of times, 186 00:08:31,780 --> 00:08:33,070 you don't say about the bad things 187 00:08:33,070 --> 00:08:34,480 when they write stories about it. 188 00:08:34,480 --> 00:08:37,429 So their-- I feel like, yeah, it was really stressful probably, 189 00:08:37,429 --> 00:08:38,400 the people from the-- 190 00:08:38,400 --> 00:08:40,400 because it's going to be an old wing who's like, 191 00:08:40,400 --> 00:08:41,608 yo, we don't want to do this. 192 00:08:41,608 --> 00:08:42,983 And there was a new wing who were 193 00:08:42,983 --> 00:08:44,410 like, no, we need to do this. 194 00:08:44,410 --> 00:08:47,170 So I think it might have been a pretty stressful thing. 195 00:08:47,170 --> 00:08:49,060 I can see how it works, but I can also 196 00:08:49,060 --> 00:08:50,990 see how they made it work. 197 00:08:50,990 --> 00:08:51,490 CHLOE: Yeah. 198 00:08:51,490 --> 00:08:52,360 AUDIENCE: That's my point. 199 00:08:52,360 --> 00:08:53,777 AUDIENCE: Which means that if it's 200 00:08:53,777 --> 00:08:57,340 such a difficult situation, and if they were still 201 00:08:57,340 --> 00:09:00,700 able to make it work just out of necessity, then [INAUDIBLE] 202 00:09:00,700 --> 00:09:02,680 probably any other government agency 203 00:09:02,680 --> 00:09:06,010 could do something similar. 204 00:09:06,010 --> 00:09:08,680 WILLIAM BONVILLIAN: So in order that we get through everything, 205 00:09:08,680 --> 00:09:10,388 I'm going to push this ahead on this one. 206 00:09:10,388 --> 00:09:14,710 But first, just a closing thought, Chris, on this one? 207 00:09:14,710 --> 00:09:17,290 CHRIS: I think the central idea here, 208 00:09:17,290 --> 00:09:19,480 that you can maybe outsource what 209 00:09:19,480 --> 00:09:23,650 you may be a little bit behind in or aren't so good at, 210 00:09:23,650 --> 00:09:27,790 is really interesting, so that the CIA can effectively 211 00:09:27,790 --> 00:09:31,360 focus on its core business, which is gathering 212 00:09:31,360 --> 00:09:34,150 and maintaining intel. 213 00:09:34,150 --> 00:09:36,520 And this goes back to our previous discussion 214 00:09:36,520 --> 00:09:39,890 about the government choosing winners and losers, 215 00:09:39,890 --> 00:09:43,090 and it's really interesting that this case has emerged 216 00:09:43,090 --> 00:09:47,560 as the real case that they've chosen a clear winner here, 217 00:09:47,560 --> 00:09:51,160 and they're actually forging a pretty strong 218 00:09:51,160 --> 00:09:53,830 public-private partnership that seems to work. 219 00:09:53,830 --> 00:09:55,890 So yeah, this is a pretty interesting article. 220 00:09:55,890 --> 00:09:58,390 WILLIAM BONVILLIAN: And I wanted to have Sarah Jane Maxted-- 221 00:09:58,390 --> 00:10:01,260 that is, our distinguished visitor in our class today-- 222 00:10:01,260 --> 00:10:02,760 just introduce herself briefly. 223 00:10:02,760 --> 00:10:05,600 And maybe, Sarah Jane, you can tell the team some things 224 00:10:05,600 --> 00:10:06,350 you're working on. 225 00:10:06,350 --> 00:10:07,350 SARAH JANE MAXTED: Sure. 226 00:10:07,350 --> 00:10:10,040 I'm Sarah Jane Maxted, also SJ. 227 00:10:10,040 --> 00:10:11,765 [INAUDIBLE] refer to me. 228 00:10:11,765 --> 00:10:14,440 I might pop in a few other times as well. 229 00:10:14,440 --> 00:10:15,903 I work at MIT. 230 00:10:15,903 --> 00:10:18,070 I run a program called the Regional Entrepreneurship 231 00:10:18,070 --> 00:10:19,840 Acceleration Program. 232 00:10:19,840 --> 00:10:22,240 We work with global regions all over the world 233 00:10:22,240 --> 00:10:24,430 to accelerate their innovation ecosystem. 234 00:10:24,430 --> 00:10:26,870 So my background-- I'm not that old, 235 00:10:26,870 --> 00:10:30,100 but my specialization is in innovation ecosystems. 236 00:10:30,100 --> 00:10:34,960 Specifically, my background's most directly related 237 00:10:34,960 --> 00:10:35,958 to the energy space. 238 00:10:35,958 --> 00:10:37,750 So I worked in the US Department of Energy, 239 00:10:37,750 --> 00:10:39,530 and I worked for a US senator, and I 240 00:10:39,530 --> 00:10:43,900 worked in the private sector as well, all in relation 241 00:10:43,900 --> 00:10:46,450 to energy and innovation ecosystems. 242 00:10:46,450 --> 00:10:48,790 So how do you cultivate-- 243 00:10:48,790 --> 00:10:50,830 how do you deal with this valley of death? 244 00:10:50,830 --> 00:10:52,420 And so it was so interesting being 245 00:10:52,420 --> 00:10:54,003 in the beginning of this conversation, 246 00:10:54,003 --> 00:10:57,580 talking about not using market terms. 247 00:10:57,580 --> 00:10:59,830 And when I worked in the federal government, 248 00:10:59,830 --> 00:11:02,560 we were not allowed to say commercialization. 249 00:11:02,560 --> 00:11:04,320 It was the death word. 250 00:11:04,320 --> 00:11:05,210 It was ridiculous. 251 00:11:05,210 --> 00:11:06,850 I was like, why can't we just use it? 252 00:11:06,850 --> 00:11:08,615 To your point, that helps clarify. 253 00:11:08,615 --> 00:11:10,470 So it was very frustrating. 254 00:11:10,470 --> 00:11:11,830 It's been really great to hear. 255 00:11:11,830 --> 00:11:14,090 AUDIENCE: What words did you use as an alternative? 256 00:11:14,090 --> 00:11:15,625 SARAH JANE MAXTED: Tech to market. 257 00:11:15,625 --> 00:11:18,590 [LAUGHTER] 258 00:11:18,722 --> 00:11:20,430 We also weren't allowed to say marketing. 259 00:11:20,430 --> 00:11:22,390 Marketing was absolutely not OK. 260 00:11:22,390 --> 00:11:24,040 AUDIENCE: What about tech transfer? 261 00:11:24,040 --> 00:11:24,300 SARAH JANE MAXTED: Yeah. 262 00:11:24,300 --> 00:11:25,450 [INTERPOSING VOICES] 263 00:11:25,450 --> 00:11:26,830 SARAH JANE MAXTED: That was OK. 264 00:11:26,830 --> 00:11:29,640 Congressmen didn't love it. 265 00:11:29,640 --> 00:11:32,350 But it's really fascinating to hear each of you guys. 266 00:11:32,350 --> 00:11:34,120 You guys are very well-versed. 267 00:11:34,120 --> 00:11:35,237 I'm quite impressed. 268 00:11:35,237 --> 00:11:36,820 But yeah, any questions on that front. 269 00:11:36,820 --> 00:11:39,130 And what I'm doing here at MIT, I also 270 00:11:39,130 --> 00:11:41,803 work with the Innovation Initiative. 271 00:11:41,803 --> 00:11:43,220 I think somebody mentioned earlier 272 00:11:43,220 --> 00:11:46,540 some of the educational things related to innovation 273 00:11:46,540 --> 00:11:49,450 entrepreneurship and business, and being 274 00:11:49,450 --> 00:11:51,440 able to have multiple skill sets. 275 00:11:51,440 --> 00:11:53,050 And I am interested at some point 276 00:11:53,050 --> 00:11:55,425 to hear what you guys think about the minor in innovation 277 00:11:55,425 --> 00:11:57,970 and entrepreneurship, which was launched last year. 278 00:11:57,970 --> 00:12:00,000 Maybe some of you are part of it. 279 00:12:00,000 --> 00:12:02,460 But anyways, that's what I [INAUDIBLE].. 280 00:12:02,460 --> 00:12:02,880 WILLIAM BONVILLIAN: Thank you. 281 00:12:02,880 --> 00:12:03,616 SARAH JANE MAXTED: You're welcome. 282 00:12:03,616 --> 00:12:05,050 Thank you for having me. 283 00:12:05,050 --> 00:12:06,300 WILLIAM BONVILLIAN: All right. 284 00:12:06,300 --> 00:12:08,842 Now we're going to crash through the last couple of readings. 285 00:12:12,350 --> 00:12:14,690 This is a piece I did in 2014. 286 00:12:14,690 --> 00:12:19,680 And essentially, I began to realize 287 00:12:19,680 --> 00:12:23,100 that there were different periods at which point 288 00:12:23,100 --> 00:12:28,770 we began to reorient in the US our understanding 289 00:12:28,770 --> 00:12:31,860 and the organization of our innovation system 290 00:12:31,860 --> 00:12:36,180 towards, heaven forbid, commercialization. 291 00:12:36,180 --> 00:12:40,530 And I roughly delineated five periods-- 292 00:12:40,530 --> 00:12:43,860 the immediate postwar, the Sputnik period, 293 00:12:43,860 --> 00:12:47,850 the 1980s competitiveness period, and then more recently, 294 00:12:47,850 --> 00:12:50,370 these new potential innovation waves 295 00:12:50,370 --> 00:12:52,590 that are coming in-- energy for sure, 296 00:12:52,590 --> 00:12:56,040 I think, but also potentially advanced manufacturing. 297 00:12:56,040 --> 00:13:01,410 And the US essentially had to rethink the Vannevar Bush 298 00:13:01,410 --> 00:13:05,760 disconnected model that it brought into place in the early 299 00:13:05,760 --> 00:13:11,190 postwar, and create a more connected model. 300 00:13:11,190 --> 00:13:14,280 And each one of these stages presents 301 00:13:14,280 --> 00:13:17,250 movement towards more connected kinds of systems. 302 00:13:17,250 --> 00:13:20,270 So the postwar period you're familiar with. 303 00:13:20,270 --> 00:13:22,710 That's Vannevar Bush himself. 304 00:13:22,710 --> 00:13:26,310 And he creates a highly connected model during the war, 305 00:13:26,310 --> 00:13:30,150 as we've discussed, and then disconnects it 306 00:13:30,150 --> 00:13:32,790 as we've gone through and talked about-- 307 00:13:32,790 --> 00:13:36,262 particularly from the Stokes reading-- 308 00:13:36,262 --> 00:13:37,470 at the close of World War II. 309 00:13:37,470 --> 00:13:40,870 So this is where, as we said before, 310 00:13:40,870 --> 00:13:44,130 our great, strong, and certainly very important 311 00:13:44,130 --> 00:13:46,260 basic research organizations come from. 312 00:13:46,260 --> 00:13:51,330 And as we've talked before, we get a lot out of that model. 313 00:13:51,330 --> 00:13:53,610 But Sputnik is an attempt-- 314 00:13:53,610 --> 00:13:56,640 led by the Defense Department, but embracing other pieces 315 00:13:56,640 --> 00:13:57,990 like NASA and NSF-- 316 00:14:00,580 --> 00:14:03,310 where the Defense Department pushes 317 00:14:03,310 --> 00:14:05,620 on that disconnected model. 318 00:14:05,620 --> 00:14:08,430 The Defense Department can't take a disconnected model. 319 00:14:08,430 --> 00:14:09,910 It just won't work. 320 00:14:09,910 --> 00:14:13,080 It's got to have fairly rapid movement 321 00:14:13,080 --> 00:14:14,690 towards actual technology development. 322 00:14:14,690 --> 00:14:16,830 And to an extent a system is disconnected, 323 00:14:16,830 --> 00:14:19,600 it's not going to serve DoD well. 324 00:14:19,600 --> 00:14:22,600 So DoD, in the course of the Cold War-- and certainly, 325 00:14:22,600 --> 00:14:24,910 this is rampant by 1957-- 326 00:14:24,910 --> 00:14:27,820 is rebuilding its much more connected, World War 327 00:14:27,820 --> 00:14:32,710 II-like system, with deep ties between industry, university 328 00:14:32,710 --> 00:14:39,820 research systems and efforts, and the defense lab system. 329 00:14:39,820 --> 00:14:44,350 So DoD plays a pervasive role at every stage of the pipeline, 330 00:14:44,350 --> 00:14:46,490 as we've talked about previously. 331 00:14:46,490 --> 00:14:50,790 So if that's the innovation pipeline, 332 00:14:50,790 --> 00:14:53,130 our classic basic research agencies 333 00:14:53,130 --> 00:14:57,930 are playing, at this stage, research and maybe 334 00:14:57,930 --> 00:14:59,640 invention of early-stage prototypes, 335 00:14:59,640 --> 00:15:02,486 maybe into early-stage development, but that's it. 336 00:15:02,486 --> 00:15:05,170 Whereas the Defense Department, as we've talked about, 337 00:15:05,170 --> 00:15:09,330 will perform the research, the development, 338 00:15:09,330 --> 00:15:12,030 fund the prototype, fund the demonstration, 339 00:15:12,030 --> 00:15:16,260 fund the test bed, and move into actual production, 340 00:15:16,260 --> 00:15:19,800 often creating initial markets for new technologies. 341 00:15:19,800 --> 00:15:22,990 That's the IT story that we've begun to tell. 342 00:15:22,990 --> 00:15:25,380 We'll tell a little more when we talk more about DARPA. 343 00:15:25,380 --> 00:15:28,860 So DoD has got a much more connected system, because 344 00:15:28,860 --> 00:15:30,630 of its potential-- and it doesn't always 345 00:15:30,630 --> 00:15:33,710 play a role at every one of these stages, 346 00:15:33,710 --> 00:15:36,300 but it potentially plays a role at all of them. 347 00:15:36,300 --> 00:15:39,140 So it's a very different organizational model, 348 00:15:39,140 --> 00:15:41,780 as we've been talking about today. 349 00:15:41,780 --> 00:15:45,760 DARPA comes right out of the Sputnik challenge. 350 00:15:45,760 --> 00:15:47,090 It's set up in '58. 351 00:15:47,090 --> 00:15:48,060 Sputnik is '57. 352 00:15:51,740 --> 00:15:54,260 President Eisenhower had been completely frustrated 353 00:15:54,260 --> 00:15:57,930 that the three separate service space 354 00:15:57,930 --> 00:16:01,240 programs were not talking to each other 355 00:16:01,240 --> 00:16:03,700 and not sharing ideas. 356 00:16:03,700 --> 00:16:06,970 Each of the services was pursuing a rival effort 357 00:16:06,970 --> 00:16:10,930 to capture what was then known as the higher ground, 358 00:16:10,930 --> 00:16:12,790 and put that higher ground project 359 00:16:12,790 --> 00:16:14,500 into its own procurement program. 360 00:16:14,500 --> 00:16:16,990 So the Army and the Air Force and Navy all 361 00:16:16,990 --> 00:16:19,180 had their own separate missile programs. 362 00:16:19,180 --> 00:16:22,690 Eisenhower wakes up, stuck with Sputnik, 363 00:16:22,690 --> 00:16:24,790 appropriately blames the services 364 00:16:24,790 --> 00:16:26,710 for not having undertaken collaboration. 365 00:16:26,710 --> 00:16:30,040 Eisenhower decides, I'm taking space away from you. 366 00:16:30,040 --> 00:16:32,502 We're going to create this DARPA thing, 367 00:16:32,502 --> 00:16:34,710 and it's going to report to the Secretary of Defense, 368 00:16:34,710 --> 00:16:36,980 and we're going to run it as a unified program. 369 00:16:36,980 --> 00:16:41,740 That only lasts a few months, because there's a big movement 370 00:16:41,740 --> 00:16:45,670 to have a civilian agency led in space, not a military agency. 371 00:16:45,670 --> 00:16:50,620 So then NACA-- which was the Aeronautical Research Agency 372 00:16:50,620 --> 00:16:53,320 that, actually, Vannevar Bush led in the 1930s, 373 00:16:53,320 --> 00:16:55,870 which is where he learns his innovation organization 374 00:16:55,870 --> 00:16:57,460 lessons-- 375 00:16:57,460 --> 00:17:01,990 that becomes NASA, and becomes aeronautics and space, 376 00:17:01,990 --> 00:17:08,810 and is essentially created around the Apollo mission. 377 00:17:08,810 --> 00:17:09,310 Max? 378 00:17:09,310 --> 00:17:12,990 MAX: Quick question regarding the previous slide. 379 00:17:12,990 --> 00:17:15,839 You mentioned that the DoD is basically involved 380 00:17:15,839 --> 00:17:18,329 in all of these steps, whereas places like the DoE 381 00:17:18,329 --> 00:17:19,319 are not involved. 382 00:17:19,319 --> 00:17:21,397 Why isn't the DoE involved? 383 00:17:21,397 --> 00:17:23,230 WILLIAM BONVILLIAN: The Department of Energy 384 00:17:23,230 --> 00:17:24,033 doesn't have a-- 385 00:17:24,033 --> 00:17:25,450 Sarah Jane can tell us about this, 386 00:17:25,450 --> 00:17:27,400 but it doesn't have a procurement budget, 387 00:17:27,400 --> 00:17:30,920 so it doesn't buy stuff. 388 00:17:30,920 --> 00:17:35,460 So DoD buys its stuff. 389 00:17:35,460 --> 00:17:38,430 It will buy the technology advances that it's supporting. 390 00:17:38,430 --> 00:17:39,720 It will buy aircraft. 391 00:17:39,720 --> 00:17:42,960 It will buy IT systems. 392 00:17:42,960 --> 00:17:44,370 It will create the initial market 393 00:17:44,370 --> 00:17:49,180 for the integrated circuit for its own computer needs. 394 00:17:49,180 --> 00:17:51,970 The Department of Energy doesn't have a procurement budget, 395 00:17:51,970 --> 00:17:55,030 therefore it's limited in its ability 396 00:17:55,030 --> 00:17:58,870 to do this creation of initial markets 397 00:17:58,870 --> 00:18:01,360 and undertake support of the production stage. 398 00:18:04,610 --> 00:18:07,110 It's hard-- look, in the end, the energy technology-- 399 00:18:07,110 --> 00:18:08,318 we're going to talk about it. 400 00:18:08,318 --> 00:18:10,760 We'll do a whole case study on energy, which I 401 00:18:10,760 --> 00:18:13,040 hope will sort of satisfy you. 402 00:18:13,040 --> 00:18:17,030 But in the end, we're going to stand up 403 00:18:17,030 --> 00:18:20,060 an energy technology revolution in the private sector. 404 00:18:20,060 --> 00:18:22,730 There's no pretending that a government contract 405 00:18:22,730 --> 00:18:25,160 model is going to achieve that revolution. 406 00:18:25,160 --> 00:18:27,910 It's gotta get stood up in the private sector. 407 00:18:27,910 --> 00:18:31,350 So I don't think it solves our problem. 408 00:18:31,350 --> 00:18:33,690 I think that we have to recognize 409 00:18:33,690 --> 00:18:38,760 the reality that 12% of the economy is in energy. 410 00:18:38,760 --> 00:18:40,380 It's going to be a civilian sector. 411 00:18:40,380 --> 00:18:43,100 Let's figure out how to stand those technologies up 412 00:18:43,100 --> 00:18:46,528 in that civilian sector, because that's the lasting model. 413 00:18:46,528 --> 00:18:47,570 I mean, it wouldn't hurt. 414 00:18:47,570 --> 00:18:49,350 The DoE would buy certain stuff. 415 00:18:49,350 --> 00:18:53,010 But Congress is just not going to give it the power. 416 00:18:53,010 --> 00:18:56,100 And Sarah Jane's comments about the unwillingness 417 00:18:56,100 --> 00:18:58,740 to talk about, God forbid, commercialization, 418 00:18:58,740 --> 00:19:01,470 is symptomatic-- 419 00:19:01,470 --> 00:19:04,980 much less initial market creation. 420 00:19:04,980 --> 00:19:08,400 So it's a challenge in other organizations. 421 00:19:08,400 --> 00:19:11,320 Third period is around competitiveness. 422 00:19:11,320 --> 00:19:13,910 So from 1973 to 1991-- 423 00:19:13,910 --> 00:19:17,170 and we talked about this in the first class-- 424 00:19:17,170 --> 00:19:21,940 the US economy significantly slowed. 425 00:19:21,940 --> 00:19:26,410 And this is where the Rust Belt comes from. 426 00:19:26,410 --> 00:19:30,320 This is the first great job disruption in manufacturing. 427 00:19:30,320 --> 00:19:32,440 This is Japan's brilliant quality production 428 00:19:32,440 --> 00:19:36,670 model coming to bear against an earlier model of US 429 00:19:36,670 --> 00:19:39,320 mass production, and quality production 430 00:19:39,320 --> 00:19:42,350 proved the better model. 431 00:19:42,350 --> 00:19:45,785 And US GDP growth historically is around the 3% level. 432 00:19:45,785 --> 00:19:47,390 It came down to the 2% level. 433 00:19:47,390 --> 00:19:49,730 US productivity growth, historically 434 00:19:49,730 --> 00:19:53,450 around the 2% level, comes down to the 1% level. 435 00:19:53,450 --> 00:19:58,270 Lower productivity growth means a lower GDP growth. 436 00:19:58,270 --> 00:20:01,290 This is not a happy time. 437 00:20:01,290 --> 00:20:03,690 This is a tough time in the United States. 438 00:20:03,690 --> 00:20:06,810 By the way, current growth rate in the United States is 2%. 439 00:20:06,810 --> 00:20:08,880 Productivity rate is 1%. 440 00:20:08,880 --> 00:20:11,430 Comparable economic problem. 441 00:20:11,430 --> 00:20:14,920 Economists now call this secular stagnation. 442 00:20:14,920 --> 00:20:18,070 We had that period for an extended period of time. 443 00:20:18,070 --> 00:20:22,150 and the US had organized its economy 444 00:20:22,150 --> 00:20:28,713 around frontier innovation, but it missed an innovation wave. 445 00:20:28,713 --> 00:20:30,130 And when you organize your economy 446 00:20:30,130 --> 00:20:32,680 around frontier innovation and you miss a wave, 447 00:20:32,680 --> 00:20:34,300 it's a problem. 448 00:20:34,300 --> 00:20:37,180 So when Japan-- and, to some extent, 449 00:20:37,180 --> 00:20:42,420 Germany as well-- leads this manufacturing revolution, 450 00:20:42,420 --> 00:20:46,120 a real innovation wave around quality production, 451 00:20:46,120 --> 00:20:49,930 the US misses the wave and has to catch up. 452 00:20:49,930 --> 00:20:51,960 So in this time period, particularly 453 00:20:51,960 --> 00:20:55,610 in the '80s It's trying to rethink its model 454 00:20:55,610 --> 00:20:59,300 and figure out how to be more competitive, 455 00:20:59,300 --> 00:21:03,410 with particularly the economies in Japan and Germany. 456 00:21:03,410 --> 00:21:07,280 And the models that it came up with were the following. 457 00:21:07,280 --> 00:21:09,860 So a lot of interesting things happened 458 00:21:09,860 --> 00:21:12,830 that are, in effect, more connected. 459 00:21:12,830 --> 00:21:14,990 And the government is going to be pushing further 460 00:21:14,990 --> 00:21:17,400 down the pipeline. 461 00:21:17,400 --> 00:21:19,920 The Bayh Dole Act. 462 00:21:19,920 --> 00:21:22,440 The government used to own the intellectual property 463 00:21:22,440 --> 00:21:25,608 rights to federal research. 464 00:21:25,608 --> 00:21:27,400 The government is not a company, so it just 465 00:21:27,400 --> 00:21:30,100 went and sat on the shelf. 466 00:21:30,100 --> 00:21:34,930 Bayh Dole Act gives intellectual property ownership 467 00:21:34,930 --> 00:21:37,870 to the universities that are conducting the research, 468 00:21:37,870 --> 00:21:39,940 and they in turn share it with their researchers. 469 00:21:43,120 --> 00:21:48,270 It makes the university an economic actor. 470 00:21:48,270 --> 00:21:50,790 So universities have done education and research 471 00:21:50,790 --> 00:21:52,440 for a long time. 472 00:21:52,440 --> 00:21:54,870 Suddenly they've got an economic stake 473 00:21:54,870 --> 00:21:57,080 in the outcomes of their research. 474 00:21:57,080 --> 00:22:00,470 So increasingly, we are drawing universities 475 00:22:00,470 --> 00:22:03,850 in to the economic system and having 476 00:22:03,850 --> 00:22:05,680 them play an economic role. 477 00:22:05,680 --> 00:22:08,120 Whole new development. 478 00:22:08,120 --> 00:22:11,470 And the Bayh Dole Act is not the only thing going on here, 479 00:22:11,470 --> 00:22:14,160 but it's one significant part of the story. 480 00:22:14,160 --> 00:22:17,870 We create the Manufacturing Extension Program 481 00:22:17,870 --> 00:22:20,600 to bring the latest manufacturing 482 00:22:20,600 --> 00:22:24,980 technologies and processes to small manufacturers. 483 00:22:24,980 --> 00:22:26,890 So the majority of US production is 484 00:22:26,890 --> 00:22:29,050 done by small firms and mid-sized firms that 485 00:22:29,050 --> 00:22:31,450 have less than 500 employees. 486 00:22:31,450 --> 00:22:34,510 They don't do any R&D. They have a lot of trouble-- 487 00:22:34,510 --> 00:22:37,210 as we talked about in the manufacturing classes-- 488 00:22:37,210 --> 00:22:40,000 keeping up with technology advances. 489 00:22:40,000 --> 00:22:45,440 So the MEP program is an attempt to bring the latest technology 490 00:22:45,440 --> 00:22:51,860 advances and process advances to small manufacturers. 491 00:22:51,860 --> 00:22:53,600 And here, there is an explicit attempt 492 00:22:53,600 --> 00:22:56,150 to understand what Japan is undertaking in quality 493 00:22:56,150 --> 00:22:59,150 manufacturing and translate that model back 494 00:22:59,150 --> 00:23:02,370 to small and mid-sized manufacturers. 495 00:23:02,370 --> 00:23:04,980 We create the advanced technology program NIST. 496 00:23:04,980 --> 00:23:08,980 That's now over, on precisely the reasons 497 00:23:08,980 --> 00:23:10,150 we've been talking about. 498 00:23:10,150 --> 00:23:12,190 That was viewed as too interventionist. 499 00:23:12,190 --> 00:23:17,530 The Commerce Department was supporting company research 500 00:23:17,530 --> 00:23:20,260 at the applied level, and it was viewed as too interventionist. 501 00:23:20,260 --> 00:23:22,480 Eventually, Congress shuts it down. 502 00:23:22,480 --> 00:23:27,670 The Small Business Innovation and Research Program. 503 00:23:27,670 --> 00:23:32,410 As we've talked before, when you all set up your startups, 504 00:23:32,410 --> 00:23:34,870 this is the first place you're going to go for money. 505 00:23:34,870 --> 00:23:37,210 This is where you go, and you can get up 506 00:23:37,210 --> 00:23:40,510 to about a million dollars in two different phases 507 00:23:40,510 --> 00:23:44,320 to really do startup efforts. 508 00:23:44,320 --> 00:23:48,220 And the number of startups that have used SBIR money-- 509 00:23:48,220 --> 00:23:49,390 they all use it. 510 00:23:49,390 --> 00:23:51,040 It's very critical. 511 00:23:51,040 --> 00:23:53,470 That program comes out of this general era. 512 00:23:53,470 --> 00:23:56,290 Sematech at DoD, that we've talked about briefly earlier 513 00:23:56,290 --> 00:23:58,480 today, is another program-- 514 00:23:58,480 --> 00:24:00,910 also quite interventionist-- where essentially, 515 00:24:00,910 --> 00:24:05,010 the government attempts an advanced manufacturing project 516 00:24:05,010 --> 00:24:07,470 in the semiconductor sector. 517 00:24:07,470 --> 00:24:09,450 So these are all program elements 518 00:24:09,450 --> 00:24:12,210 that began developing in this period. 519 00:24:12,210 --> 00:24:17,100 Interestingly, we don't have to follow through, 520 00:24:17,100 --> 00:24:21,060 because Japan misses the IT revolution that really 521 00:24:21,060 --> 00:24:24,360 begins to hit at about 1990. 522 00:24:24,360 --> 00:24:27,100 The US leads it. 523 00:24:27,100 --> 00:24:30,880 We did very well very quickly starting in that 1990s time 524 00:24:30,880 --> 00:24:31,430 period-- 525 00:24:31,430 --> 00:24:33,250 one of the most successful economic periods 526 00:24:33,250 --> 00:24:38,050 in US 20th century, 21st century economic history. 527 00:24:38,050 --> 00:24:41,410 So we forgot the problems we had. 528 00:24:41,410 --> 00:24:43,330 And of course, those manufacturing problems 529 00:24:43,330 --> 00:24:45,670 are now right back on us, because we didn't fully 530 00:24:45,670 --> 00:24:47,050 follow through. 531 00:24:47,050 --> 00:24:51,913 Period 4 is the problem of energy innovation. 532 00:24:51,913 --> 00:24:53,580 We're going to do a whole class on this. 533 00:24:53,580 --> 00:24:55,810 I'm not going to spend much time on it. 534 00:24:55,810 --> 00:25:00,750 But energy is driving the organizational model, 535 00:25:00,750 --> 00:25:03,465 and an organization like ARPA-E-- 536 00:25:03,465 --> 00:25:07,860 a DARPA within DoE-- 537 00:25:07,860 --> 00:25:12,000 explicitly has what Sarah Jane reminded us of-- 538 00:25:12,000 --> 00:25:16,350 a tech to market outlook that really very much considers 539 00:25:16,350 --> 00:25:18,810 the possibilities of commercialization before it 540 00:25:18,810 --> 00:25:20,880 selects the R&D projects it's going to fund. 541 00:25:20,880 --> 00:25:23,360 Is there a pathway to commercialization? 542 00:25:23,360 --> 00:25:25,590 There's a conscious attempt there. 543 00:25:25,590 --> 00:25:28,350 So this is not a curiosity-driven, Vannevar Bush 544 00:25:28,350 --> 00:25:30,300 basic research agency. 545 00:25:30,300 --> 00:25:34,200 ERE explicitly works with industry for the great bulk 546 00:25:34,200 --> 00:25:37,790 of its research portfolio. 547 00:25:37,790 --> 00:25:38,930 Advanced manufacturing. 548 00:25:38,930 --> 00:25:40,850 We've talked about this one as well. 549 00:25:40,850 --> 00:25:46,340 This may be an evolving innovation movement. 550 00:25:46,340 --> 00:25:48,950 We'll see what the current administration 551 00:25:48,950 --> 00:25:49,820 wants to do with it. 552 00:25:49,820 --> 00:25:51,510 It's not clear yet. 553 00:25:51,510 --> 00:25:53,840 So those are five periods. 554 00:25:53,840 --> 00:25:54,860 I'll just recap. 555 00:25:54,860 --> 00:25:56,120 Period 1, the postwar. 556 00:25:56,120 --> 00:25:58,220 We move from a wartime connected system 557 00:25:58,220 --> 00:25:59,870 to a disconnected system. 558 00:25:59,870 --> 00:26:03,050 And then slowly over time we've been, 559 00:26:03,050 --> 00:26:06,320 creating more and more connections in our system. 560 00:26:06,320 --> 00:26:10,200 So Sputnik creates DARPA, and we'll 561 00:26:10,200 --> 00:26:12,060 talk a good bit about DARPA. 562 00:26:12,060 --> 00:26:15,030 I'm just laying the groundwork here on several topics, 563 00:26:15,030 --> 00:26:17,250 including this one. 564 00:26:17,250 --> 00:26:21,970 But a reconnection of the whole Defense innovation system. 565 00:26:21,970 --> 00:26:24,920 Period 3, around competitiveness. 566 00:26:24,920 --> 00:26:27,760 We do a series of experiments-- 567 00:26:27,760 --> 00:26:30,460 which, with one exception, all of which remain in place 568 00:26:30,460 --> 00:26:32,650 and have been pretty successful over time-- 569 00:26:32,650 --> 00:26:38,045 to attempt better connections between industry 570 00:26:38,045 --> 00:26:40,390 and the commercialization efforts and university 571 00:26:40,390 --> 00:26:41,410 research. 572 00:26:41,410 --> 00:26:43,750 And then the energy challenge and advanced manufacturing 573 00:26:43,750 --> 00:26:47,260 challenge push us further down that pipeline. 574 00:26:47,260 --> 00:26:49,180 The advanced manufacturing institutes 575 00:26:49,180 --> 00:26:52,370 and manufacturing that we talked about, 576 00:26:52,370 --> 00:26:54,380 those bring together collaborations 577 00:26:54,380 --> 00:26:59,720 of private sector firms, government, and university 578 00:26:59,720 --> 00:27:02,930 researchers for a collaborative effort around developing 579 00:27:02,930 --> 00:27:04,710 new advanced technologies. 580 00:27:04,710 --> 00:27:06,140 It's not early-stage technology. 581 00:27:06,140 --> 00:27:06,920 It's very applied. 582 00:27:06,920 --> 00:27:08,150 It's quite late-stage. 583 00:27:08,150 --> 00:27:11,270 A lot of development. 584 00:27:11,270 --> 00:27:14,470 So these are much-- this is the government supporting an effort 585 00:27:14,470 --> 00:27:17,020 to move much further down the pipeline 586 00:27:17,020 --> 00:27:21,820 towards commercialization of these new technologies. 587 00:27:21,820 --> 00:27:22,870 Who's got this one? 588 00:27:22,870 --> 00:27:23,650 RASHEED: Me. 589 00:27:23,650 --> 00:27:24,692 WILLIAM BONVILLIAN: Good. 590 00:27:26,980 --> 00:27:29,650 RASHEED: So bringing together these five periods, 591 00:27:29,650 --> 00:27:32,882 I thought these were pretty-- 592 00:27:32,882 --> 00:27:34,840 these held up pretty well with all the readings 593 00:27:34,840 --> 00:27:37,180 that we've done so far. 594 00:27:37,180 --> 00:27:40,570 In particular, I think the postwar and the Sputnik one 595 00:27:40,570 --> 00:27:42,640 we've kind of gone over in spades. 596 00:27:42,640 --> 00:27:48,760 But a little bit newer, I think, is the period 3 through 5. 597 00:27:48,760 --> 00:27:52,640 But particularly, if we focus on '80s competitiveness, 598 00:27:52,640 --> 00:27:57,090 we see that that's spurred on a little bit towards-- 599 00:27:57,090 --> 00:28:00,580 with the advent of Sematech and semiconductors, 600 00:28:00,580 --> 00:28:04,130 and missing its innovation wave with Japan. 601 00:28:04,130 --> 00:28:07,540 And is there sort of this-- 602 00:28:07,540 --> 00:28:09,040 so what we want to find out here is, 603 00:28:09,040 --> 00:28:11,470 is there an idea that globalization 604 00:28:11,470 --> 00:28:14,210 brings about new forms? 605 00:28:14,210 --> 00:28:16,300 So now that we have this '80s competitiveness, 606 00:28:16,300 --> 00:28:17,960 these periods get a lot shorter. 607 00:28:17,960 --> 00:28:20,020 So the '80s, and the period 4 is in the 2000s, 608 00:28:20,020 --> 00:28:22,513 and now we're in advanced manufacturing. 609 00:28:22,513 --> 00:28:24,430 So is there this opportunity for globalization 610 00:28:24,430 --> 00:28:27,460 to make these innovation waves maybe shorter, 611 00:28:27,460 --> 00:28:30,340 or add more and make them more compact so more people have 612 00:28:30,340 --> 00:28:31,570 this opportunity? 613 00:28:31,570 --> 00:28:33,070 WILLIAM BONVILLIAN: Rasheed, I think 614 00:28:33,070 --> 00:28:34,903 that's an important point, because actually, 615 00:28:34,903 --> 00:28:36,970 each one of these stages are driven 616 00:28:36,970 --> 00:28:42,430 by external developments landing on the US economic situation 617 00:28:42,430 --> 00:28:44,950 and forcing change. 618 00:28:44,950 --> 00:28:47,800 So they're just not materializing from within. 619 00:28:47,800 --> 00:28:49,540 These are all external developments 620 00:28:49,540 --> 00:28:51,070 that force a US response. 621 00:28:51,070 --> 00:28:52,800 So you make an important point. 622 00:28:55,930 --> 00:28:58,830 RASHEED: But is this something that you guys also saw, maybe, 623 00:28:58,830 --> 00:29:03,720 with the idea that globalization will 624 00:29:03,720 --> 00:29:06,450 bring more innovation to the forefront-- 625 00:29:06,450 --> 00:29:09,420 maybe not just in the US, but elsewhere as well, and make 626 00:29:09,420 --> 00:29:12,060 other people respond in the way that we have? 627 00:29:12,060 --> 00:29:13,520 MAX: At least intuitively it does, 628 00:29:13,520 --> 00:29:15,562 because if you have more people that are talking, 629 00:29:15,562 --> 00:29:18,390 more people that are exchanging ideas through globalization, 630 00:29:18,390 --> 00:29:20,460 then by extension, you would think 631 00:29:20,460 --> 00:29:23,850 that would mean that more ideas can get produced 632 00:29:23,850 --> 00:29:27,417 and people have access to more resources, which 633 00:29:27,417 --> 00:29:29,250 means that whatever ideas that come up with, 634 00:29:29,250 --> 00:29:31,236 they can implement better. 635 00:29:31,236 --> 00:29:32,800 So at least intuitively. 636 00:29:32,800 --> 00:29:35,355 AUDIENCE: I would challenge the resource point, though, 637 00:29:35,355 --> 00:29:36,390 because that would trigger [INAUDIBLE].. 638 00:29:36,390 --> 00:29:37,920 AUDIENCE: No, I was going to talk about everyone talking, 639 00:29:37,920 --> 00:29:41,060 if that's a good thing, because usually, the best decisions are 640 00:29:41,060 --> 00:29:45,183 made when everybody's following along the same path, 641 00:29:45,183 --> 00:29:46,850 and it's also not mainly just one person 642 00:29:46,850 --> 00:29:47,850 thinking for themselves. 643 00:29:47,850 --> 00:29:51,060 If you think about Wall Street and speculation-- 644 00:29:51,060 --> 00:29:52,730 because you get an echo chamber. 645 00:29:52,730 --> 00:29:55,138 And this was shown by the whole Facebook case 646 00:29:55,138 --> 00:29:56,555 after the election, where everyone 647 00:29:56,555 --> 00:29:57,680 was saying the same things. 648 00:29:57,680 --> 00:29:59,660 So it's usually-- a lot of evasion 649 00:29:59,660 --> 00:30:02,780 happens when an individual thinks 650 00:30:02,780 --> 00:30:05,222 of a different perspective and then echoes back 651 00:30:05,222 --> 00:30:05,930 to the community. 652 00:30:05,930 --> 00:30:08,263 So if you can have individual figures, it's really good. 653 00:30:08,263 --> 00:30:11,000 But usually what happens is, because of dogma or just 654 00:30:11,000 --> 00:30:14,720 the way groups work, there's very few innovative ideas, 655 00:30:14,720 --> 00:30:16,130 and it's more of an echo chamber. 656 00:30:16,130 --> 00:30:19,400 AUDIENCE: Well, that's true, but that's been true always. 657 00:30:19,400 --> 00:30:24,620 So my thought is that having a greater access to more 658 00:30:24,620 --> 00:30:27,140 communities that have these different ideas, 659 00:30:27,140 --> 00:30:29,537 then you have more of those Zuckerbergs 660 00:30:29,537 --> 00:30:33,560 who are thinking of something different. 661 00:30:33,560 --> 00:30:34,310 AUDIENCE: Perhaps. 662 00:30:34,310 --> 00:30:35,092 AUDIENCE: Perhaps. 663 00:30:35,092 --> 00:30:36,550 AUDIENCE: I would say, getting back 664 00:30:36,550 --> 00:30:39,820 to Rasheed's original question or point, 665 00:30:39,820 --> 00:30:43,060 I think that we probably are seeing 666 00:30:43,060 --> 00:30:47,680 a contraction of technology waves, 667 00:30:47,680 --> 00:30:53,500 or these periods, probably due to just the speed at which 668 00:30:53,500 --> 00:30:55,390 information can be transferred. 669 00:30:55,390 --> 00:30:58,590 That might explain it. 670 00:30:58,590 --> 00:31:00,760 RASHEED: Also, I'll argue that financing 671 00:31:00,760 --> 00:31:04,150 and getting a reputation for things, that's easier 672 00:31:04,150 --> 00:31:06,880 now, because back in the day during Edison 673 00:31:06,880 --> 00:31:10,780 or during Ford's day, getting money 674 00:31:10,780 --> 00:31:13,607 was a huge problem for an entrepreneur. 675 00:31:13,607 --> 00:31:15,190 Nowadays, it's very easy to get money. 676 00:31:15,190 --> 00:31:16,773 And also, you get to keep your equity, 677 00:31:16,773 --> 00:31:19,030 because back in the day, too, you would create-- 678 00:31:19,030 --> 00:31:22,060 you could create one of the best technologies, 679 00:31:22,060 --> 00:31:24,670 and you would give up 1/3 your company or the full company, 680 00:31:24,670 --> 00:31:26,140 and then they'd kick you out. 681 00:31:26,140 --> 00:31:27,850 So you came up with this innovation. 682 00:31:27,850 --> 00:31:30,058 You understand technology, how to bring it to market. 683 00:31:30,058 --> 00:31:32,308 And now, because this person wants to make more money, 684 00:31:32,308 --> 00:31:33,070 they kick you out. 685 00:31:33,070 --> 00:31:34,690 So that's really a good opportunity, 686 00:31:34,690 --> 00:31:36,760 because now it's really the technologist who 687 00:31:36,760 --> 00:31:37,527 has more power. 688 00:31:37,527 --> 00:31:39,360 So that's why these cycles are [INAUDIBLE].. 689 00:31:39,360 --> 00:31:41,320 AUDIENCE: But see, that's exactly where-- 690 00:31:41,320 --> 00:31:43,330 the point at which I would challenge Max, 691 00:31:43,330 --> 00:31:47,472 because just because we have a globalized spread of ideas 692 00:31:47,472 --> 00:31:49,930 doesn't mean that we have a globalized spread of resources. 693 00:31:49,930 --> 00:31:52,270 And often our innovation, especially the United States, 694 00:31:52,270 --> 00:31:53,530 is built on imperialism. 695 00:31:53,530 --> 00:31:56,320 Dependency theory, borrowing from [INAUDIBLE] economics, 696 00:31:56,320 --> 00:31:59,590 is one of the reasons why the United States and why colonial 697 00:31:59,590 --> 00:32:02,040 governments were able to make such incredible gains. 698 00:32:02,040 --> 00:32:04,890 In particular, we saw this with the Dutch East India Company. 699 00:32:04,890 --> 00:32:07,000 Their exploitation of Southeast Asia 700 00:32:07,000 --> 00:32:11,530 was exactly what enabled them then to promote, I guess, 701 00:32:11,530 --> 00:32:15,220 a Marxist society in the Netherlands, 702 00:32:15,220 --> 00:32:18,460 and then enabled the spread of colonization in the New World. 703 00:32:18,460 --> 00:32:22,780 And so what we're seeing now, especially with the innovate 704 00:32:22,780 --> 00:32:25,602 here, produce there paradigm is, I think-- 705 00:32:25,602 --> 00:32:28,060 and the sort of detriments that we talked about maybe three 706 00:32:28,060 --> 00:32:30,640 classes ago, about the ways in which countries are now 707 00:32:30,640 --> 00:32:33,700 understanding how to innovate there as well-- 708 00:32:33,700 --> 00:32:38,380 is that we may be sharing all of our ideas, 709 00:32:38,380 --> 00:32:42,070 but there's not going to be a capture of value economically 710 00:32:42,070 --> 00:32:46,960 or in terms of the practical gain of technological advances, 711 00:32:46,960 --> 00:32:49,750 because those resources are not local. 712 00:32:49,750 --> 00:32:52,270 We're going to have to purchase them from other countries. 713 00:32:52,270 --> 00:32:55,630 And if the United States doesn't have access to those resources 714 00:32:55,630 --> 00:32:57,400 and production and manufacturing, 715 00:32:57,400 --> 00:33:00,040 then we're going to miss out on the benefits of having created 716 00:33:00,040 --> 00:33:01,502 those ideas domestically. 717 00:33:01,502 --> 00:33:03,460 And that's what I think is so treacherous about 718 00:33:03,460 --> 00:33:06,790 the international relations landscape 719 00:33:06,790 --> 00:33:09,430 that the Trump administration is creating for us, 720 00:33:09,430 --> 00:33:10,930 and why it's really important for us 721 00:33:10,930 --> 00:33:14,980 to be wary of our reputation on the international plane, 722 00:33:14,980 --> 00:33:19,120 because we don't have all of the resources necessary 723 00:33:19,120 --> 00:33:24,100 in order to produce, and if we destroy our reputation abroad, 724 00:33:24,100 --> 00:33:25,840 people won't want to work with us. 725 00:33:25,840 --> 00:33:28,150 And if they now have the innovation capacity 726 00:33:28,150 --> 00:33:31,900 as well, then what is the future for American innovation? 727 00:33:31,900 --> 00:33:35,310 Imperialism hegemony does not exist for Americans anymore. 728 00:33:35,310 --> 00:33:38,220 AUDIENCE: But I would argue two points on what you just said. 729 00:33:38,220 --> 00:33:40,560 One is, the interesting thing about Trump 730 00:33:40,560 --> 00:33:43,350 is, he became such a polarizing figure that abroad, people 731 00:33:43,350 --> 00:33:44,380 know we don't like him. 732 00:33:44,380 --> 00:33:45,630 So it's like, that's just him. 733 00:33:45,630 --> 00:33:46,690 That's not the US. 734 00:33:46,690 --> 00:33:48,810 And then two, I think you're thinking 735 00:33:48,810 --> 00:33:50,760 about-- your framework is based on the past, 736 00:33:50,760 --> 00:33:51,927 in terms of what's happened. 737 00:33:51,927 --> 00:33:55,390 And I think in the past, it's been very much-- 738 00:33:55,390 --> 00:33:56,910 we're a scarcity society. 739 00:33:56,910 --> 00:33:59,230 So there's a scarce amount of resources, 740 00:33:59,230 --> 00:34:00,820 so we need to take from somebody else. 741 00:34:00,820 --> 00:34:01,890 So there's been-- there's a philosopher who 742 00:34:01,890 --> 00:34:03,598 talked about how we have so many enemies, 743 00:34:03,598 --> 00:34:06,060 and the US creates so many enemies because we 744 00:34:06,060 --> 00:34:07,304 used to take, take, take. 745 00:34:07,304 --> 00:34:09,429 But I think what will change in the next 100 years, 746 00:34:09,429 --> 00:34:11,969 200 years is that we will get closer 747 00:34:11,969 --> 00:34:15,960 to like a post-scarcity society so that we have more resources. 748 00:34:15,960 --> 00:34:18,925 Say people discover a better form of energy, so we have-- 749 00:34:18,925 --> 00:34:21,699 assume infinite energy, even though that's ideal. 750 00:34:21,699 --> 00:34:24,420 Assume we have water, because we've figured out desalination, 751 00:34:24,420 --> 00:34:25,679 so we can get enough food. 752 00:34:25,679 --> 00:34:27,630 Assume that now we have automation, 753 00:34:27,630 --> 00:34:29,760 so people don't have to work with their hands 754 00:34:29,760 --> 00:34:30,920 and more people can think. 755 00:34:30,920 --> 00:34:33,170 And then assume we're expanding, and we go into space. 756 00:34:33,170 --> 00:34:36,304 So now we're also-- it's like the American period 757 00:34:36,304 --> 00:34:38,429 of growth, where people are expanding other places. 758 00:34:38,429 --> 00:34:41,900 So the game before was to take and take and take. 759 00:34:41,900 --> 00:34:44,320 And if the game becomes more to, how do you give? 760 00:34:44,320 --> 00:34:46,520 What becomes valuable once you already-- 761 00:34:46,520 --> 00:34:48,190 to have money wouldn't be valuable. 762 00:34:48,190 --> 00:34:49,023 It would be respect. 763 00:34:49,023 --> 00:34:50,820 It'd be, this person got a Nobel Prize. 764 00:34:50,820 --> 00:34:54,570 This person did a social initiative. 765 00:34:54,570 --> 00:34:56,850 That's just an evolution of what you just said. 766 00:34:56,850 --> 00:34:58,450 WILLIAM BONVILLIAN: So you guys are really leading us out 767 00:34:58,450 --> 00:34:58,980 of here. 768 00:34:58,980 --> 00:35:00,450 [LAUGHTER] 769 00:35:00,450 --> 00:35:02,022 Go off into utopia land. 770 00:35:02,022 --> 00:35:02,980 AUDIENCE: Yeah, really. 771 00:35:02,980 --> 00:35:05,188 RASHEED: [INAUDIBLE] That was four individual points. 772 00:35:05,188 --> 00:35:06,243 [INTERPOSING VOICES] 773 00:35:06,243 --> 00:35:07,410 AUDIENCE: But the thing is-- 774 00:35:07,410 --> 00:35:08,485 AUDIENCE: Bring it back. 775 00:35:08,485 --> 00:35:10,110 AUDIENCE: --from a startup perspective, 776 00:35:10,110 --> 00:35:11,430 you don't think linearly. 777 00:35:11,430 --> 00:35:12,490 You think exponentially. 778 00:35:12,490 --> 00:35:14,240 So we're talking about these contractions. 779 00:35:14,240 --> 00:35:17,500 That could be a reality in terms of-- 780 00:35:17,500 --> 00:35:19,320 if you think about how the past used to be, 781 00:35:19,320 --> 00:35:20,445 that's not the game we're playing anymore. 782 00:35:20,445 --> 00:35:20,557 RASHEED: Yeah. 783 00:35:20,557 --> 00:35:22,320 I don't think that's the game we're playing anymore. 784 00:35:22,320 --> 00:35:23,160 You could probably look at these, 785 00:35:23,160 --> 00:35:24,510 and that's pretty already-- 786 00:35:24,510 --> 00:35:25,740 you're already looking exponential. 787 00:35:25,740 --> 00:35:27,000 AUDIENCE: It could be bioengineering, energy, 788 00:35:27,000 --> 00:35:28,000 and physics all at once. 789 00:35:28,000 --> 00:35:31,800 RASHEED: Yeah, which I think offers the opportunity 790 00:35:31,800 --> 00:35:33,260 to be pretty cool. 791 00:35:33,260 --> 00:35:34,350 And I think ARPA-E-- 792 00:35:34,350 --> 00:35:37,490 we can focus on them a little bit now, on period 4-- 793 00:35:37,490 --> 00:35:40,260 is looking at these interdeparmental collaborative 794 00:35:40,260 --> 00:35:44,940 mechanisms to spur these short-term, three-to-five-year, 795 00:35:44,940 --> 00:35:49,980 very industry-focused targeted growth periods. 796 00:35:49,980 --> 00:35:53,910 And so is that an idea that we want to kind of take back, 797 00:35:53,910 --> 00:35:57,730 is can we look at-- now that we're so interconnected in all 798 00:35:57,730 --> 00:36:00,570 of this globalization, [INAUDIBLE] try to create is, 799 00:36:00,570 --> 00:36:05,520 can we focus all of these things in these targeted areas 800 00:36:05,520 --> 00:36:07,410 with any degree of success? 801 00:36:07,410 --> 00:36:11,970 Or are we just playing the game, gambling [INAUDIBLE]?? 802 00:36:11,970 --> 00:36:14,280 MAX: So you're saying to focus the defense-- 803 00:36:14,280 --> 00:36:17,200 for example, the Department of Energy, you would say, 804 00:36:17,200 --> 00:36:19,095 focus it only on one form of energy. 805 00:36:19,095 --> 00:36:20,220 Is that what you're asking? 806 00:36:22,828 --> 00:36:24,120 RASHEED: Let me take this back. 807 00:36:24,120 --> 00:36:25,120 SARAH JANE MAXTED: Hear about the mechanism. 808 00:36:25,120 --> 00:36:25,550 RASHEED: Yeah. 809 00:36:25,550 --> 00:36:27,450 So as a mechanism-- does the mechanism work? 810 00:36:27,450 --> 00:36:28,908 But the mechanism is basically, you 811 00:36:28,908 --> 00:36:32,210 have this idea for advanced materials, 812 00:36:32,210 --> 00:36:35,860 and you take a couple of industry partners-- 813 00:36:35,860 --> 00:36:37,610 the Department of Energy, for example, 814 00:36:37,610 --> 00:36:41,690 and maybe even an international partner-- and you 815 00:36:41,690 --> 00:36:44,480 make them all work together on an advanced materials project 816 00:36:44,480 --> 00:36:45,663 for three to five years. 817 00:36:45,663 --> 00:36:48,080 Do you think all of these people can get together and work 818 00:36:48,080 --> 00:36:50,390 effectively in the short time span 819 00:36:50,390 --> 00:36:52,740 to produce any degree of success? 820 00:36:52,740 --> 00:36:57,540 MAX: Well, obviously, I have a bit of a pension for fusion, 821 00:36:57,540 --> 00:37:00,170 so my first thought's going to be here-- 822 00:37:00,170 --> 00:37:04,430 the International Thermonuclear Experimental Reactor-- 823 00:37:04,430 --> 00:37:07,060 partially because science and engineering for plasma 824 00:37:07,060 --> 00:37:09,260 is just really hard, and partially 825 00:37:09,260 --> 00:37:11,540 because I feel that, at least in my opinion, 826 00:37:11,540 --> 00:37:13,640 it hasn't been managed as effectively as it 827 00:37:13,640 --> 00:37:16,260 could have been. 828 00:37:16,260 --> 00:37:19,140 It was supposed to be the best example 829 00:37:19,140 --> 00:37:21,420 that I can think of international collaboration 830 00:37:21,420 --> 00:37:23,610 trying to solve a very big problem. 831 00:37:23,610 --> 00:37:28,830 And it's more than double its first budget, 832 00:37:28,830 --> 00:37:33,990 and it's, what, 10, 20 years behind schedule? 833 00:37:33,990 --> 00:37:36,510 Of course, that's not to say that the approach itself-- 834 00:37:36,510 --> 00:37:39,300 the fact that you're using international resources-- 835 00:37:39,300 --> 00:37:42,330 that's not to say that that is inherently flawed. 836 00:37:42,330 --> 00:37:45,630 But I can't really think of any counterexamples. 837 00:37:48,580 --> 00:37:51,080 AUDIENCE: The way we think about it as a businessperson is-- 838 00:37:51,080 --> 00:37:52,520 this a pretty common problem-- 839 00:37:52,520 --> 00:37:54,200 is, you stress people. 840 00:37:54,200 --> 00:37:56,373 I gave the case example before of Silicon Valley, 841 00:37:56,373 --> 00:37:58,040 and how there's not minorities and there 842 00:37:58,040 --> 00:37:59,060 weren't that many women. 843 00:37:59,060 --> 00:38:02,420 So sometimes what you do is, you actually make the problem 844 00:38:02,420 --> 00:38:04,130 be very apparent. 845 00:38:04,130 --> 00:38:05,600 And so the CEO of a company knows, 846 00:38:05,600 --> 00:38:06,933 there's a problem in my company. 847 00:38:06,933 --> 00:38:09,140 They won't announce it, but they'll leak a paper. 848 00:38:09,140 --> 00:38:11,390 And somebody will be like, oh, there's a real problem. 849 00:38:11,390 --> 00:38:12,860 And then everyone's like, oh, we need to solve this. 850 00:38:12,860 --> 00:38:14,277 Oh my god, there's all this press. 851 00:38:14,277 --> 00:38:17,460 And you use the tools at your disposal. 852 00:38:17,460 --> 00:38:18,830 And so, yeah, you can-- 853 00:38:18,830 --> 00:38:20,990 you have to stress them just the right way, 854 00:38:20,990 --> 00:38:23,270 because people would stay by themselves 855 00:38:23,270 --> 00:38:24,748 in their own little bubble. 856 00:38:24,748 --> 00:38:26,540 But if you stress them so it's like, oh no, 857 00:38:26,540 --> 00:38:28,640 we need to do this, we need this now, 858 00:38:28,640 --> 00:38:31,690 that's how I think about it. 859 00:38:31,690 --> 00:38:33,350 MAX: Actually-- oh, sorry. 860 00:38:33,350 --> 00:38:34,433 SARAH JANE MAXTED: No, no. 861 00:38:34,433 --> 00:38:40,040 I was just going to say, I think the question that 862 00:38:40,040 --> 00:38:44,930 gets beyond the mechanism itself of the ARPA-E 863 00:38:44,930 --> 00:38:50,780 is, how do you monitor or evaluate success? 864 00:38:50,780 --> 00:38:54,390 So I think-- to your point, some technologies take a lot longer. 865 00:38:54,390 --> 00:38:57,680 So is three to four or five years a good time horizon? 866 00:38:57,680 --> 00:39:00,200 And if we keep it at that, that's fine, 867 00:39:00,200 --> 00:39:03,080 but how do we bundle in all these different energy 868 00:39:03,080 --> 00:39:03,860 technologies? 869 00:39:03,860 --> 00:39:06,890 For instance, for some, maybe more building technologies 870 00:39:06,890 --> 00:39:09,480 are going to be a lot quicker, and then some, like fusion, 871 00:39:09,480 --> 00:39:10,730 are going to take much longer. 872 00:39:10,730 --> 00:39:14,120 And how do you identify the right technologies 873 00:39:14,120 --> 00:39:17,900 or applied research to do in that capacity, 874 00:39:17,900 --> 00:39:19,400 and how do you evaluate the success? 875 00:39:19,400 --> 00:39:22,760 And that's the tech to market question as well-- 876 00:39:22,760 --> 00:39:26,660 what are those points of evaluation?-- which is, 877 00:39:26,660 --> 00:39:27,950 I think, [INAUDIBLE]. 878 00:39:27,950 --> 00:39:29,825 WILLIAM BONVILLIAN: Sarah, you're driving us, 879 00:39:29,825 --> 00:39:32,060 I think, to some additional perceptions 880 00:39:32,060 --> 00:39:37,400 here given your basic question, Rasheed. 881 00:39:37,400 --> 00:39:39,740 What are the innovation organization models 882 00:39:39,740 --> 00:39:42,260 that we're going to use if we're trying 883 00:39:42,260 --> 00:39:44,150 to take on these bigger tasks? 884 00:39:44,150 --> 00:39:46,610 In other words, it was straightforward enough 885 00:39:46,610 --> 00:39:50,630 to do a curiosity-driven research project and fund one 886 00:39:50,630 --> 00:39:51,830 PI. 887 00:39:51,830 --> 00:39:56,630 But if we're moving the model to move much further 888 00:39:56,630 --> 00:40:01,780 down the pipeline, which is what all these stages represent, 889 00:40:01,780 --> 00:40:04,120 what are the organizational mainstay models 890 00:40:04,120 --> 00:40:05,900 we're going to use here? 891 00:40:05,900 --> 00:40:09,430 And then you come to a model like the manufacturing 892 00:40:09,430 --> 00:40:12,820 institutes, which can typically have 893 00:40:12,820 --> 00:40:17,300 more than 100 companies; four or five major research 894 00:40:17,300 --> 00:40:20,210 universities; a comparable number of community colleges, 895 00:40:20,210 --> 00:40:25,550 if not more; and, potentially, one or more federal agencies 896 00:40:25,550 --> 00:40:29,660 and five or six states and state economic development 897 00:40:29,660 --> 00:40:30,890 organizations. 898 00:40:30,890 --> 00:40:32,692 As some of the Defense Department 899 00:40:32,692 --> 00:40:35,150 described this to me, standing up a manufacturing institute 900 00:40:35,150 --> 00:40:39,740 is like standing up a country, compared to funding a single PI 901 00:40:39,740 --> 00:40:40,940 researcher. 902 00:40:40,940 --> 00:40:42,980 So these call for-- 903 00:40:42,980 --> 00:40:45,470 and I think is what Rasheed is driving us to 904 00:40:45,470 --> 00:40:47,510 and Sarah is driving us to-- 905 00:40:47,510 --> 00:40:52,850 they call for a much more complex organizational model, 906 00:40:52,850 --> 00:40:56,690 because the tasks have gotten considerably larger, 907 00:40:56,690 --> 00:40:58,810 and the number of actors that need to be involved 908 00:40:58,810 --> 00:41:00,230 is getting considerably larger. 909 00:41:00,230 --> 00:41:02,498 So these are all lessons learned that I 910 00:41:02,498 --> 00:41:04,040 think we're going to have to pull out 911 00:41:04,040 --> 00:41:08,210 of the experiments were running now on energy and potentially 912 00:41:08,210 --> 00:41:11,030 advanced manufacturing, and really consider 913 00:41:11,030 --> 00:41:12,202 the models we're using. 914 00:41:12,202 --> 00:41:13,910 Rasheed, do you want to give us a closing 915 00:41:13,910 --> 00:41:15,772 thought about this reading? 916 00:41:15,772 --> 00:41:16,430 RASHEED: Yeah. 917 00:41:16,430 --> 00:41:19,760 I thought this reading was pretty comprehensive, 918 00:41:19,760 --> 00:41:23,510 and it seemed very Bill, I would say, 919 00:41:23,510 --> 00:41:26,900 because it did a good job of starting us 920 00:41:26,900 --> 00:41:30,260 from the beginning at this postwar system 921 00:41:30,260 --> 00:41:32,360 and walking us all the way through now 922 00:41:32,360 --> 00:41:35,180 to advanced manufacturing and the [INAUDIBLE] problems 923 00:41:35,180 --> 00:41:36,650 that we have today. 924 00:41:36,650 --> 00:41:37,460 So it was pretty-- 925 00:41:37,460 --> 00:41:39,590 I felt like I was in class, reading through and-- 926 00:41:39,590 --> 00:41:40,687 [LAUGHTER] 927 00:41:40,687 --> 00:41:42,270 AUDIENCE: I felt like, I've done this. 928 00:41:42,270 --> 00:41:43,490 RASHEED: Yeah, yeah. 929 00:41:43,490 --> 00:41:45,170 And then you get to the new stuff at the end, and you're-- 930 00:41:45,170 --> 00:41:46,220 WILLIAM BONVILLIAN: Rasheed, I had 931 00:41:46,220 --> 00:41:48,595 to write this because I needed it in class, because there 932 00:41:48,595 --> 00:41:51,200 wasn't anything else that covered this entire panoply. 933 00:41:51,200 --> 00:41:55,380 So that's really, frankly, the reason why I wrote it. 934 00:41:55,380 --> 00:41:55,880 All right. 935 00:41:55,880 --> 00:41:59,780 We're now going to jump to another Bill reading, 936 00:41:59,780 --> 00:42:02,000 and now we're going to take a deep dive 937 00:42:02,000 --> 00:42:05,690 into this whole concept of legacy sectors. 938 00:42:05,690 --> 00:42:08,510 And this will be foundational as we do some of the case studies, 939 00:42:08,510 --> 00:42:10,861 like in energy, like in health care. 940 00:42:10,861 --> 00:42:13,120 AUDIENCE: If I could just ask you, 941 00:42:13,120 --> 00:42:16,040 at the very end of this last [INAUDIBLE] just talking about, 942 00:42:16,040 --> 00:42:18,733 you have-- 943 00:42:18,733 --> 00:42:20,150 I guess your driving conclusion is 944 00:42:20,150 --> 00:42:24,720 that the new model innovation organizations discussed here 945 00:42:24,720 --> 00:42:26,990 deserve ongoing scrutiny and pragmatic evaluation 946 00:42:26,990 --> 00:42:29,063 of their performance to refine these models. 947 00:42:29,063 --> 00:42:30,980 Obviously, you published this three years ago, 948 00:42:30,980 --> 00:42:33,615 and were probably thinking of this five years ago. 949 00:42:33,615 --> 00:42:35,990 So I was curious if you could talk a little bit about how 950 00:42:35,990 --> 00:42:38,420 you've maybe developed that already, 951 00:42:38,420 --> 00:42:41,880 or if you've been thinking about what a model might look like. 952 00:42:41,880 --> 00:42:43,625 WILLIAM BONVILLIAN: Well, I learned a lot 953 00:42:43,625 --> 00:42:47,400 in working on the advanced manufacturing initiative-- 954 00:42:47,400 --> 00:42:49,160 the Advanced Manufacturing Partnership 955 00:42:49,160 --> 00:42:51,860 that the President set up, and the Production 956 00:42:51,860 --> 00:42:54,500 in the Innovation Economy project at MIT, 957 00:42:54,500 --> 00:42:58,180 because it really forced a lot of thinking 958 00:42:58,180 --> 00:43:00,760 about what the organizational model was going to be. 959 00:43:00,760 --> 00:43:02,710 And in turn, I've learned a tremendous amount 960 00:43:02,710 --> 00:43:04,120 about looking at what the Department of Energy 961 00:43:04,120 --> 00:43:05,170 has been doing. 962 00:43:05,170 --> 00:43:08,020 So we'll dive into this in the energy case study, 963 00:43:08,020 --> 00:43:11,540 but essentially, DoE, at the front end 964 00:43:11,540 --> 00:43:13,760 of the innovation, the R&D stage, 965 00:43:13,760 --> 00:43:16,130 has created a whole set of new models. 966 00:43:16,130 --> 00:43:19,550 It is a very different agency than it was 10 years ago. 967 00:43:19,550 --> 00:43:22,850 And it's created a host of new pieces 968 00:43:22,850 --> 00:43:25,280 on the innovation front that enable 969 00:43:25,280 --> 00:43:27,140 it to do a lot more things. 970 00:43:27,140 --> 00:43:30,950 So yes, they still have a Vannevar Bush basic research 971 00:43:30,950 --> 00:43:32,690 agency-- 972 00:43:32,690 --> 00:43:35,190 the Office of Science, a $5 billion 973 00:43:35,190 --> 00:43:37,190 basic research organization-- but they've 974 00:43:37,190 --> 00:43:39,680 got all these other pieces on the table now which 975 00:43:39,680 --> 00:43:44,190 make the mix quite interesting. 976 00:43:44,190 --> 00:43:46,728 So we'll have a chance, actually, Steph, 977 00:43:46,728 --> 00:43:48,770 to dive into what some of those models look like. 978 00:43:48,770 --> 00:43:53,350 We'll take a particular look at ARPA-E, which is actually maybe 979 00:43:53,350 --> 00:43:54,850 on the chopping block at the moment. 980 00:43:54,850 --> 00:43:58,420 So it may turn out to be an historical lesson. 981 00:43:58,420 --> 00:44:03,070 But a pretty interesting organizational model. 982 00:44:03,070 --> 00:44:06,010 But let me do another driver here 983 00:44:06,010 --> 00:44:10,610 that forces us to think about innovation organization, which 984 00:44:10,610 --> 00:44:14,200 is innovation in legacy sectors. 985 00:44:14,200 --> 00:44:23,650 So the US is pretty good at doing the next big thing 986 00:44:23,650 --> 00:44:27,760 and standing up new technologies in frontier territories. 987 00:44:27,760 --> 00:44:29,170 In other words, in effect-- 988 00:44:29,170 --> 00:44:31,090 to use a metaphor-- 989 00:44:31,090 --> 00:44:34,750 we take our new technologies, we put them into covered wagons, 990 00:44:34,750 --> 00:44:38,020 we go across the mountain, and we open up a new technology 991 00:44:38,020 --> 00:44:39,370 territory. 992 00:44:39,370 --> 00:44:43,760 We do frontier innovation, and we're pretty good at this. 993 00:44:43,760 --> 00:44:49,430 There was nothing really like computing before computing. 994 00:44:49,430 --> 00:44:51,500 So that would be a good example of opening up 995 00:44:51,500 --> 00:44:54,700 a whole new territory. 996 00:44:54,700 --> 00:45:03,230 The US is not good at bringing innovation into legacy sectors. 997 00:45:03,230 --> 00:45:07,710 The new innovations often have to parachute in, 998 00:45:07,710 --> 00:45:09,780 and they get shot at on the way down. 999 00:45:13,740 --> 00:45:15,890 So the US tends to do the next big thing, 1000 00:45:15,890 --> 00:45:19,280 but doesn't tend to go back and fix the old. 1001 00:45:19,280 --> 00:45:25,040 That's why the-- driving from Kennedy Airport into Manhattan 1002 00:45:25,040 --> 00:45:27,500 often is kind of a third-world experience. 1003 00:45:27,500 --> 00:45:30,020 Sometimes you think you could lose an axle on your cab 1004 00:45:30,020 --> 00:45:33,350 before you get into downtown. 1005 00:45:33,350 --> 00:45:37,550 We don't tend to maintain a lot of our existing systems. 1006 00:45:37,550 --> 00:45:39,080 We push on to the next big thing. 1007 00:45:39,080 --> 00:45:40,850 And that's not bad. 1008 00:45:40,850 --> 00:45:43,700 That's not a bad American tendency. 1009 00:45:43,700 --> 00:45:45,805 But we do pay a price for it if we're 1010 00:45:45,805 --> 00:45:47,930 going to have to bring innovation into these legacy 1011 00:45:47,930 --> 00:45:50,430 sectors. 1012 00:45:50,430 --> 00:45:51,930 Just think of the health care debate 1013 00:45:51,930 --> 00:45:54,420 we've been having in recent months. 1014 00:45:54,420 --> 00:45:56,820 The United States does biotech. 1015 00:45:56,820 --> 00:45:59,640 It does not go back and fix the health care delivery system. 1016 00:45:59,640 --> 00:46:00,610 That's a legacy sector. 1017 00:46:00,610 --> 00:46:01,402 That would be hard. 1018 00:46:01,402 --> 00:46:03,660 We'd rather open a new thing. 1019 00:46:03,660 --> 00:46:06,030 So this is a problem in our society. 1020 00:46:06,030 --> 00:46:08,740 Look, every society has got these problems. 1021 00:46:08,740 --> 00:46:11,080 It's hard for anybody to innovate in the legacy sectors. 1022 00:46:11,080 --> 00:46:13,320 But it's particularly tough here, I would argue. 1023 00:46:13,320 --> 00:46:18,240 And the problem is that a lot of our big societal problems 1024 00:46:18,240 --> 00:46:21,360 are tied to these legacy sectors. 1025 00:46:21,360 --> 00:46:25,170 We can't avoid the innovation challenge in these sectors-- 1026 00:46:25,170 --> 00:46:28,440 climate and energy, food and water, 1027 00:46:28,440 --> 00:46:33,460 the problem we've got of quality job creation, health care 1028 00:46:33,460 --> 00:46:38,660 delivery, improving education to address inequality problems. 1029 00:46:38,660 --> 00:46:41,300 These are all profound societal challenges, 1030 00:46:41,300 --> 00:46:45,620 and they all have to be fixed within legacy sectors. 1031 00:46:45,620 --> 00:46:48,950 And to do this, we've got to confront these sectors. 1032 00:46:48,950 --> 00:46:50,513 Frankly, I was-- 1033 00:46:50,513 --> 00:46:53,180 Chuck Weiss and I, my co-author, were amazed we wrote this book. 1034 00:46:53,180 --> 00:46:54,440 There's no literature on this. 1035 00:46:54,440 --> 00:46:56,570 There's no literature in the innovation policy 1036 00:46:56,570 --> 00:46:59,450 field about innovating in legacy sectors. 1037 00:46:59,450 --> 00:47:03,530 It's a problem that's just hidden in plain sight. 1038 00:47:03,530 --> 00:47:05,280 So how would we do this? 1039 00:47:05,280 --> 00:47:06,570 Because we need to do it. 1040 00:47:06,570 --> 00:47:09,620 One example is the revolution in military affairs in the defense 1041 00:47:09,620 --> 00:47:13,470 sector in the 1990s, where we bring 1042 00:47:13,470 --> 00:47:18,210 a raft of new technologies to bear even though the Defense 1043 00:47:18,210 --> 00:47:21,030 Department is one of the most notorious legacy sectors 1044 00:47:21,030 --> 00:47:22,290 around. 1045 00:47:22,290 --> 00:47:25,710 How is it the DoD is able to organize to bring 1046 00:47:25,710 --> 00:47:28,200 these technology advances in? 1047 00:47:28,200 --> 00:47:32,250 But we can start to see a whole set of innovations 1048 00:47:32,250 --> 00:47:34,410 that are starting to move in what 1049 00:47:34,410 --> 00:47:36,000 we can consider legacy sectors. 1050 00:47:36,000 --> 00:47:38,300 So advanced manufacturing. 1051 00:47:38,300 --> 00:47:40,560 Manufacturing is definitely a legacy sector. 1052 00:47:40,560 --> 00:47:42,000 New energy technologies. 1053 00:47:42,000 --> 00:47:44,160 Intelligent cars. 1054 00:47:44,160 --> 00:47:46,470 Higher education for sure is a legacy sector. 1055 00:47:46,470 --> 00:47:49,170 We're starting to see online education. 1056 00:47:49,170 --> 00:47:50,070 Commercial space. 1057 00:47:50,070 --> 00:47:52,410 So there are possibilities here. 1058 00:47:52,410 --> 00:47:56,340 We're starting to see what some of the possibilities might be. 1059 00:47:56,340 --> 00:47:59,710 So learning how to innovate in these sectors is critical. 1060 00:47:59,710 --> 00:48:01,410 What are some of the take-home lessons? 1061 00:48:01,410 --> 00:48:03,240 There are obstacles to innovation 1062 00:48:03,240 --> 00:48:05,280 in the legacy sectors. 1063 00:48:05,280 --> 00:48:10,440 Innovation, by the way, is not just the shiny new lights 1064 00:48:10,440 --> 00:48:12,367 and only the cutting edge. 1065 00:48:12,367 --> 00:48:13,950 There's a lot of innovation that needs 1066 00:48:13,950 --> 00:48:15,570 to land in these legacy sectors that 1067 00:48:15,570 --> 00:48:18,150 are not quite as glamorous. 1068 00:48:18,150 --> 00:48:21,420 Legacy sectors have a lot in common, both in the US 1069 00:48:21,420 --> 00:48:22,780 and abroad. 1070 00:48:22,780 --> 00:48:26,397 So there are definitional aspects of a legacy sector 1071 00:48:26,397 --> 00:48:28,980 that apply to manufacturing, but also to health care delivery. 1072 00:48:28,980 --> 00:48:31,950 We can find commonalities here. 1073 00:48:31,950 --> 00:48:34,800 And legacy sectors in countries here and abroad 1074 00:48:34,800 --> 00:48:37,380 have commonalities. 1075 00:48:37,380 --> 00:48:40,560 And the context of innovation can be every bit as important 1076 00:48:40,560 --> 00:48:43,390 as the innovation system itself. 1077 00:48:43,390 --> 00:48:46,500 So this class is focused on the innovation system, 1078 00:48:46,500 --> 00:48:48,320 but it's within a larger context. 1079 00:48:48,320 --> 00:48:51,530 And I'll explain what that means in a minute. 1080 00:48:51,530 --> 00:48:55,691 Entrenched legacy sectors resist innovation. 1081 00:48:59,930 --> 00:49:03,140 For example, we often provide incentives 1082 00:49:03,140 --> 00:49:05,870 to producers that don't align with societal needs. 1083 00:49:08,690 --> 00:49:15,080 The legacy sectors are defended by a technological, economic, 1084 00:49:15,080 --> 00:49:19,890 political, social, and maybe even cultural paradigm. 1085 00:49:19,890 --> 00:49:22,010 So a legacy sector is a castle, and it's 1086 00:49:22,010 --> 00:49:24,170 got a rich defense system. 1087 00:49:24,170 --> 00:49:27,170 That is, it defends the technology advances 1088 00:49:27,170 --> 00:49:28,220 that it's encouraged. 1089 00:49:28,220 --> 00:49:32,450 It will defend the economic models that it's pursued. 1090 00:49:32,450 --> 00:49:37,700 It will use the political system to block change. 1091 00:49:37,700 --> 00:49:40,550 And it uses societal and educational systems 1092 00:49:40,550 --> 00:49:43,010 to ensure that it gets staffed up 1093 00:49:43,010 --> 00:49:46,070 and has a social outlook that tends to protect it. 1094 00:49:46,070 --> 00:49:51,660 So these legacy sectors tend to share this common paradigm. 1095 00:49:51,660 --> 00:49:57,250 They will resist disruptive innovation, 1096 00:49:57,250 --> 00:50:03,430 and they will be more accepting of innovations that 1097 00:50:03,430 --> 00:50:05,610 fit their own business models. 1098 00:50:05,610 --> 00:50:07,270 And we'll talk about that in a second. 1099 00:50:09,913 --> 00:50:11,330 The features of the legacy sector, 1100 00:50:11,330 --> 00:50:14,780 they get a little definitional, and I 1101 00:50:14,780 --> 00:50:16,780 don't want to go into a lot of details on these. 1102 00:50:16,780 --> 00:50:18,300 But you get the idea. 1103 00:50:18,300 --> 00:50:21,200 And these are characteristics that-- 1104 00:50:21,200 --> 00:50:24,990 a legacy sector will share all of these characteristics, 1105 00:50:24,990 --> 00:50:27,660 but it will typically share many. 1106 00:50:27,660 --> 00:50:29,350 In the characteristics side, there 1107 00:50:29,350 --> 00:50:31,170 are often perverse prices that don't 1108 00:50:31,170 --> 00:50:36,030 reflect externalities-- i.e., like the low cost of gasoline. 1109 00:50:36,030 --> 00:50:38,580 There will be an established infrastructure-- 1110 00:50:38,580 --> 00:50:39,660 gas stations. 1111 00:50:39,660 --> 00:50:42,060 Massive infrastructure system that's got 1112 00:50:42,060 --> 00:50:45,260 to get rethought and overcome if you're going to make change. 1113 00:50:45,260 --> 00:50:48,240 There are strong public expectations 1114 00:50:48,240 --> 00:50:51,540 of low cost of energy in the United States. 1115 00:50:51,540 --> 00:50:53,940 It's very hard to overcome these. 1116 00:50:53,940 --> 00:50:56,640 There are often regulatory requirements 1117 00:50:56,640 --> 00:50:59,370 that block entry of new technology-- 1118 00:50:59,370 --> 00:51:02,400 again, in the energy space. 1119 00:51:02,400 --> 00:51:07,680 Good luck in connecting your out of state new solar system 1120 00:51:07,680 --> 00:51:10,230 with the transmission system across a series of states. 1121 00:51:10,230 --> 00:51:11,855 You've going to have to get the states' 1122 00:51:11,855 --> 00:51:13,040 regulatory systems lined up. 1123 00:51:13,040 --> 00:51:14,910 It's very tough. 1124 00:51:14,910 --> 00:51:16,920 There are career pathways and curricula 1125 00:51:16,920 --> 00:51:21,180 at universities that tend to support the existing system. 1126 00:51:21,180 --> 00:51:24,690 All of these, there's typically very limited R&D 1127 00:51:24,690 --> 00:51:26,380 compared to revenue. 1128 00:51:26,380 --> 00:51:31,760 So in the energy sector, for example, less than 1% 1129 00:51:31,760 --> 00:51:34,460 of annual revenues is spent on research and development 1130 00:51:34,460 --> 00:51:36,120 in the energy private sector. 1131 00:51:36,120 --> 00:51:40,870 An astonishingly low number for a major industry. 1132 00:51:40,870 --> 00:51:43,660 And there are powerful vested interests behind these legacy 1133 00:51:43,660 --> 00:51:46,080 sectors that defend them. 1134 00:51:46,080 --> 00:51:49,600 On terms of-- I'm not going to go into detail 1135 00:51:49,600 --> 00:51:51,520 about these kind of market imperfections, 1136 00:51:51,520 --> 00:51:57,605 but often perverse subsidies, network economies, 1137 00:51:57,605 --> 00:51:59,980 non-appropriability where the developer of the technology 1138 00:51:59,980 --> 00:52:03,220 can't recapture its value. 1139 00:52:03,220 --> 00:52:05,800 There's often problems of collective action. 1140 00:52:05,800 --> 00:52:09,330 So for example, it's tough to introduce technology advance 1141 00:52:09,330 --> 00:52:12,760 into the building sector because it's so totally decentralized. 1142 00:52:12,760 --> 00:52:14,510 There are not major actors. 1143 00:52:14,510 --> 00:52:17,500 There's just lots and lots and lots of little actors. 1144 00:52:17,500 --> 00:52:19,510 So you can't get collective action together 1145 00:52:19,510 --> 00:52:21,640 in a sector that's organized like that. 1146 00:52:21,640 --> 00:52:26,390 There's a short time horizon for financing, 1147 00:52:26,390 --> 00:52:28,550 and that limits the ability to scale up 1148 00:52:28,550 --> 00:52:30,530 new technology advances. 1149 00:52:30,530 --> 00:52:36,470 So these are-- now, in contrast, if you're 1150 00:52:36,470 --> 00:52:40,910 developing a technology that is compatible with the legacy 1151 00:52:40,910 --> 00:52:44,310 sector's paradigm of technology and business model 1152 00:52:44,310 --> 00:52:46,533 and so forth, then you can do it. 1153 00:52:46,533 --> 00:52:48,200 You can do it in relatively short order. 1154 00:52:48,200 --> 00:52:52,800 So fracking was adapted within, really, a 15-year period. 1155 00:52:52,800 --> 00:52:57,350 The original technology advances came out of the national labs 1156 00:52:57,350 --> 00:53:00,140 around things like 3D seismic imaging. 1157 00:53:04,100 --> 00:53:07,370 And they moved very quickly because fracking 1158 00:53:07,370 --> 00:53:11,370 fit the existing fossil fuel economy so nicely. 1159 00:53:11,370 --> 00:53:14,960 If you're doing solar, good luck to you. 1160 00:53:14,960 --> 00:53:18,000 It's a much more complicated adaptation process. 1161 00:53:18,000 --> 00:53:20,032 So if you're doing disruptive technologies, 1162 00:53:20,032 --> 00:53:21,740 that's where the problem really comes in. 1163 00:53:24,420 --> 00:53:30,050 So we have a series of models of the dynamics of innovation, 1164 00:53:30,050 --> 00:53:32,650 and we've been struggling to see these 1165 00:53:32,650 --> 00:53:35,420 in the course of the classes so far. 1166 00:53:35,420 --> 00:53:39,190 But as you think about it, there's really five ways 1167 00:53:39,190 --> 00:53:43,840 that our economy undertakes innovation. 1168 00:53:43,840 --> 00:53:48,310 One, we've spent a lot of time last class and this class-- 1169 00:53:48,310 --> 00:53:50,110 the pipeline. 1170 00:53:50,110 --> 00:53:51,890 Again, the model-- dump basic research 1171 00:53:51,890 --> 00:53:53,765 in the end of the pipeline, mysterious things 1172 00:53:53,765 --> 00:53:55,780 happen, great products emerge. 1173 00:53:55,780 --> 00:53:57,190 That's technology push. 1174 00:53:57,190 --> 00:53:59,950 Federal government is, in effect, 1175 00:53:59,950 --> 00:54:03,130 pushing a new kind of technology or scientific advance 1176 00:54:03,130 --> 00:54:05,740 into the pipeline, and hopefully it 1177 00:54:05,740 --> 00:54:07,130 will emerge from the pipeline. 1178 00:54:07,130 --> 00:54:10,840 It's a technology push model, a technology supply model. 1179 00:54:10,840 --> 00:54:13,630 That's the dominant model underlying US innovation 1180 00:54:13,630 --> 00:54:15,160 policy. 1181 00:54:15,160 --> 00:54:16,840 But there's also induced innovation. 1182 00:54:16,840 --> 00:54:18,400 Remember, Vernon Ruttan came up with 1183 00:54:18,400 --> 00:54:20,410 this theoretical framework. 1184 00:54:20,410 --> 00:54:24,760 Industry does the majority of innovation in our economy. 1185 00:54:24,760 --> 00:54:27,370 Industry will typically see a market niche or a market 1186 00:54:27,370 --> 00:54:31,570 opportunity and will move to fill that opportunity-- 1187 00:54:31,570 --> 00:54:35,900 typically with incremental advances, not radical advances. 1188 00:54:35,900 --> 00:54:38,510 So that is a demand pull. 1189 00:54:38,510 --> 00:54:41,240 Industry is identifying a potential demand 1190 00:54:41,240 --> 00:54:43,670 that can pull the technology into the marketplace. 1191 00:54:43,670 --> 00:54:47,530 That's typically what industry does. 1192 00:54:47,530 --> 00:54:48,780 But then there's other models. 1193 00:54:51,700 --> 00:54:54,670 The extended pipeline, we've just been talking about today. 1194 00:54:54,670 --> 00:54:56,410 That's what the Defense Department does. 1195 00:54:56,410 --> 00:54:59,050 It operates at every stage of the pipeline. 1196 00:54:59,050 --> 00:55:01,510 So in addition to the pipeline model in the US system, 1197 00:55:01,510 --> 00:55:04,910 we have an extended pipeline model in the US system. 1198 00:55:04,910 --> 00:55:09,050 A fourth model is manufacturing-led innovation. 1199 00:55:09,050 --> 00:55:11,520 US doesn't do this one. 1200 00:55:11,520 --> 00:55:13,540 We didn't build this one. 1201 00:55:13,540 --> 00:55:17,970 Countries like Germany and Japan do this model. 1202 00:55:17,970 --> 00:55:21,220 Korea, Taiwan do this model. 1203 00:55:21,220 --> 00:55:24,105 China now jumped on this model. 1204 00:55:24,105 --> 00:55:25,730 In other words, their innovation system 1205 00:55:25,730 --> 00:55:30,990 is led by the creative work, the new engineering, 1206 00:55:30,990 --> 00:55:35,010 the new science that can lead to produce products. 1207 00:55:35,010 --> 00:55:36,830 It's that product design stage that's 1208 00:55:36,830 --> 00:55:42,880 central in a manufacturing-led innovation system. 1209 00:55:42,880 --> 00:55:44,050 US never built one of these. 1210 00:55:44,050 --> 00:55:46,530 So by creating these manufacturing institutes, 1211 00:55:46,530 --> 00:55:52,350 that's an attempt in the US to get this piece into our system. 1212 00:55:52,350 --> 00:55:59,330 Overall, entry into legacy sectors 1213 00:55:59,330 --> 00:56:01,970 is such a complex effort that you're not 1214 00:56:01,970 --> 00:56:06,030 going to do one of these innovation organization models. 1215 00:56:06,030 --> 00:56:09,850 You're going to have to do probably all of them. 1216 00:56:09,850 --> 00:56:12,540 When you think about a sector as complex as energy, 1217 00:56:12,540 --> 00:56:16,000 you've probably got to tackle all of these dynamics 1218 00:56:16,000 --> 00:56:18,240 to get the changes you need. 1219 00:56:18,240 --> 00:56:23,490 So that puts a premium on innovation organization, 1220 00:56:23,490 --> 00:56:26,850 the way in which you organize your innovation system. 1221 00:56:26,850 --> 00:56:29,340 That becomes critical when you're trying 1222 00:56:29,340 --> 00:56:30,840 to tackle a legacy sector. 1223 00:56:30,840 --> 00:56:34,560 Just as we were having that conversation, Steph, 1224 00:56:34,560 --> 00:56:38,040 that you pushed for, what's the new ways 1225 00:56:38,040 --> 00:56:40,450 of organizing around innovation? 1226 00:56:40,450 --> 00:56:42,470 What are the new models? 1227 00:56:42,470 --> 00:56:45,110 If you're trying to innovate in a legacy sector like energy 1228 00:56:45,110 --> 00:56:47,510 or manufacturing, you're going to need new models, 1229 00:56:47,510 --> 00:56:49,760 and you're going to need to think about the innovation 1230 00:56:49,760 --> 00:56:51,680 dynamics at each one of these points. 1231 00:56:54,390 --> 00:56:57,730 Oh, I don't want to forget. 1232 00:56:57,730 --> 00:57:01,390 You need change agents, because legacy sectors will not 1233 00:57:01,390 --> 00:57:02,530 change themselves. 1234 00:57:05,232 --> 00:57:06,690 You're going to have to have people 1235 00:57:06,690 --> 00:57:10,830 prepared to push these legacy sectors to adapt change. 1236 00:57:10,830 --> 00:57:12,330 And maybe it's political leadership. 1237 00:57:12,330 --> 00:57:14,820 Maybe it's new companies and startups 1238 00:57:14,820 --> 00:57:17,040 that are going to be the change agents. 1239 00:57:17,040 --> 00:57:18,870 Maybe it's a new R&D agency. 1240 00:57:18,870 --> 00:57:21,968 Maybe it's a mix of all of the above. 1241 00:57:21,968 --> 00:57:23,760 But you're going to need change agents that 1242 00:57:23,760 --> 00:57:28,460 are prepared to move things in these legacy sectors. 1243 00:57:28,460 --> 00:57:31,070 So those are the five models. 1244 00:57:31,070 --> 00:57:33,440 Some of this calls for us to think about what 1245 00:57:33,440 --> 00:57:35,420 the governmental role is. 1246 00:57:35,420 --> 00:57:38,035 Do we need a more activist governmental role 1247 00:57:38,035 --> 00:57:39,035 in this kind of context? 1248 00:57:41,880 --> 00:57:43,262 What's the process? 1249 00:57:43,262 --> 00:57:44,720 And this is particularly important, 1250 00:57:44,720 --> 00:57:48,390 because this is going to be important in your papers. 1251 00:57:48,390 --> 00:57:51,600 So the stuff we're talking about here is going to be-- 1252 00:57:51,600 --> 00:57:55,780 in terms of launching new technologies, 1253 00:57:55,780 --> 00:57:58,090 this multi-step, five-step process 1254 00:57:58,090 --> 00:57:59,620 is going to be something that I'm 1255 00:57:59,620 --> 00:58:03,700 going to ask you to use as you consider the topics you develop 1256 00:58:03,700 --> 00:58:05,830 in your papers. 1257 00:58:05,830 --> 00:58:09,980 Step one-- you can't innovate without innovation. 1258 00:58:09,980 --> 00:58:14,530 So you're going to need stuff. 1259 00:58:14,530 --> 00:58:16,870 So you're going to have to have a front-end innovation 1260 00:58:16,870 --> 00:58:20,610 system that's giving you creative stuff 1261 00:58:20,610 --> 00:58:24,060 to innovate with. 1262 00:58:24,060 --> 00:58:25,470 Here's some ideas here. 1263 00:58:25,470 --> 00:58:28,170 Form critical innovation institutions. 1264 00:58:28,170 --> 00:58:30,830 Build thinking communities so that you can have a-- 1265 00:58:30,830 --> 00:58:32,970 you got have a community that's big enough 1266 00:58:32,970 --> 00:58:35,550 to really get a lot of ideas on the table for innovation 1267 00:58:35,550 --> 00:58:37,560 to occur. 1268 00:58:37,560 --> 00:58:39,380 It's Romer. 1269 00:58:42,348 --> 00:58:44,280 It's the prospective theory here. 1270 00:58:44,280 --> 00:58:46,350 You've got to have a thinking community that's 1271 00:58:46,350 --> 00:58:49,590 at a big enough scale that they can really work on creating 1272 00:58:49,590 --> 00:58:51,630 innovations in a legacy sector. 1273 00:58:51,630 --> 00:58:54,930 You need to link the technologists to the operators. 1274 00:58:54,930 --> 00:58:56,690 They can't be in isolation from each other 1275 00:58:56,690 --> 00:58:58,695 if you want to implement this stuff. 1276 00:58:58,695 --> 00:59:00,570 And you can use that island and bridge model, 1277 00:59:00,570 --> 00:59:02,850 and we'll talk more about this next week 1278 00:59:02,850 --> 00:59:05,910 when we talk about innovation by great groups. 1279 00:59:05,910 --> 00:59:10,290 But your innovators need to be connected decision-makers 1280 00:59:10,290 --> 00:59:14,710 that can effectuate the changes they're going to propose. 1281 00:59:14,710 --> 00:59:16,525 Some other steps, and then I'll quit 1282 00:59:16,525 --> 00:59:20,950 and we can do some Q&A. Step two is, 1283 00:59:20,950 --> 00:59:24,130 each technology is going to have a different launch path. 1284 00:59:24,130 --> 00:59:29,110 The launch path for batteries for grid storage 1285 00:59:29,110 --> 00:59:32,380 is probably going to be a very different launch path 1286 00:59:32,380 --> 00:59:36,410 than batteries for transport. 1287 00:59:36,410 --> 00:59:37,850 Launching into the utility sector 1288 00:59:37,850 --> 00:59:40,130 versus launching into cars, those 1289 00:59:40,130 --> 00:59:42,350 are different launch pathways. 1290 00:59:42,350 --> 00:59:45,320 So you're going to have to think about what the launch pathway 1291 00:59:45,320 --> 00:59:48,110 is for your technology that you want 1292 00:59:48,110 --> 00:59:50,150 to have enter the marketplace. 1293 00:59:50,150 --> 00:59:54,210 And then you're going to need to tie support packages 1294 00:59:54,210 --> 00:59:56,580 to those launch pathways that fit, 1295 00:59:56,580 --> 01:00:00,030 that are relevant to the particular launch pathways. 1296 01:00:00,030 --> 01:00:04,260 A fourth step is, look at the innovation system and the gaps 1297 01:00:04,260 --> 01:00:05,910 in the innovation system. 1298 01:00:05,910 --> 01:00:08,150 What are the holes in the system? 1299 01:00:08,150 --> 01:00:09,440 Where are things dying? 1300 01:00:09,440 --> 01:00:11,510 For sure it's the valley of death, 1301 01:00:11,510 --> 01:00:13,640 but what are the other gaps in that system? 1302 01:00:13,640 --> 01:00:15,500 Because again, the valley of death 1303 01:00:15,500 --> 01:00:19,760 is only between research and development. 1304 01:00:19,760 --> 01:00:21,260 You've got all kinds of other stages 1305 01:00:21,260 --> 01:00:24,020 to get through, too, all the way up into production. 1306 01:00:24,020 --> 01:00:27,110 What are the gaps in that overall system? 1307 01:00:27,110 --> 01:00:29,500 So think about what the gaps are, and then think 1308 01:00:29,500 --> 01:00:31,270 about institutional fixes-- 1309 01:00:31,270 --> 01:00:33,790 public or private or both-- 1310 01:00:33,790 --> 01:00:37,070 that fill those gaps. 1311 01:00:37,070 --> 01:00:40,900 So this is kind of a menu of how to think about bringing 1312 01:00:40,900 --> 01:00:43,090 innovation into legacy sectors. 1313 01:00:43,090 --> 01:00:45,700 And if you all are going to work in the energy field, 1314 01:00:45,700 --> 01:00:47,910 that's the king of legacy sectors. 1315 01:00:47,910 --> 01:00:50,800 Right if you want to pursue advanced manufacturing, 1316 01:00:50,800 --> 01:00:52,950 that is a big-time legacy sector. 1317 01:00:52,950 --> 01:00:54,700 So we're going to have to have a much more 1318 01:00:54,700 --> 01:00:58,030 sophisticated innovation organization approach. 1319 01:00:58,030 --> 01:01:02,800 We're not going to solve these problems by individual awards 1320 01:01:02,800 --> 01:01:05,290 to individual investigators. 1321 01:01:05,290 --> 01:01:07,880 That's not going to work. 1322 01:01:07,880 --> 01:01:09,230 It's not going to get us there. 1323 01:01:09,230 --> 01:01:12,080 We're going to have to have a whole new delivery system 1324 01:01:12,080 --> 01:01:15,640 for the innovation system. 1325 01:01:15,640 --> 01:01:18,860 Let's see if there's anything else I want to cover. 1326 01:01:18,860 --> 01:01:23,210 Change agent orchestrates the activity here, and therefore 1327 01:01:23,210 --> 01:01:24,450 is a pretty critical player. 1328 01:01:24,450 --> 01:01:26,870 So again, these chapters here are 1329 01:01:26,870 --> 01:01:30,200 pretty important for your paper, and that five-step process 1330 01:01:30,200 --> 01:01:32,060 and understanding the dynamics of innovation 1331 01:01:32,060 --> 01:01:36,390 are pieces that you're going to need in your paper. 1332 01:01:36,390 --> 01:01:38,640 So Rasheed, it's all yours. 1333 01:01:38,640 --> 01:01:40,190 RASHEED: Great. 1334 01:01:40,190 --> 01:01:41,840 That's actually a great place to start, 1335 01:01:41,840 --> 01:01:46,100 because I think a lot of us were pretty much in line 1336 01:01:46,100 --> 01:01:48,890 with what was going on, understanding what a legacy 1337 01:01:48,890 --> 01:01:50,240 sector is and identifying them. 1338 01:01:50,240 --> 01:01:52,380 We're pretty much all OK with that. 1339 01:01:52,380 --> 01:01:55,190 Where I think people started to diverge 1340 01:01:55,190 --> 01:02:00,260 was deciding on who would play the role of these change 1341 01:02:00,260 --> 01:02:01,482 agents. 1342 01:02:01,482 --> 01:02:03,440 A lot of people were looking in their questions 1343 01:02:03,440 --> 01:02:06,080 to figure out who would be the best poised 1344 01:02:06,080 --> 01:02:08,660 in certain situations to play that role of a change agent. 1345 01:02:08,660 --> 01:02:11,960 Would it change for different initiatives? 1346 01:02:11,960 --> 01:02:15,710 And I think one of the interesting things 1347 01:02:15,710 --> 01:02:19,460 was, we tried to identify of this community of change agents 1348 01:02:19,460 --> 01:02:20,240 first. 1349 01:02:20,240 --> 01:02:22,280 We were all looking for this thinking community 1350 01:02:22,280 --> 01:02:24,038 for different individuals. 1351 01:02:24,038 --> 01:02:25,580 So just to start off with, who do you 1352 01:02:25,580 --> 01:02:30,080 think might be able to play a role, in any particular case, 1353 01:02:30,080 --> 01:02:32,810 to be the change agent for a legacy sector? 1354 01:02:32,810 --> 01:02:33,874 And it can be anyone. 1355 01:02:39,121 --> 01:02:41,970 AUDIENCE: I'll start it off. 1356 01:02:41,970 --> 01:02:43,150 This is a complex question. 1357 01:02:43,150 --> 01:02:44,380 There's different answers. 1358 01:02:44,380 --> 01:02:47,710 But I think for energy, I think the big thing would be having 1359 01:02:47,710 --> 01:02:50,610 a breakthrough innovation. 1360 01:02:50,610 --> 01:02:52,330 Because the main issue right now is, 1361 01:02:52,330 --> 01:02:56,150 we are worried about climate change, but solar and-- 1362 01:02:56,150 --> 01:02:59,627 well, solar in general is expensive, and doesn't really 1363 01:02:59,627 --> 01:03:01,960 do what we need to do, because if you look at the energy 1364 01:03:01,960 --> 01:03:05,650 market, how much is solar, it's rather small versus our energy 1365 01:03:05,650 --> 01:03:06,910 needs and also the cost. 1366 01:03:06,910 --> 01:03:08,440 It's hard to innovate there. 1367 01:03:08,440 --> 01:03:10,850 But if you can come up with a much, 1368 01:03:10,850 --> 01:03:14,310 much better innovation-- so maybe fusion. 1369 01:03:14,310 --> 01:03:15,560 Maybe there's something there. 1370 01:03:15,560 --> 01:03:17,102 It'd be the difference between if you 1371 01:03:17,102 --> 01:03:20,290 had to come up with a whole new phone line system versus if you 1372 01:03:20,290 --> 01:03:21,820 create the cell phone. 1373 01:03:21,820 --> 01:03:24,290 You might have a huge opportunity there. 1374 01:03:24,290 --> 01:03:26,950 And the thing that I think is important this issue is-- 1375 01:03:26,950 --> 01:03:28,840 Steve Case, the guy who made AOL, 1376 01:03:28,840 --> 01:03:31,210 has this thin called the third-wave entrepreneur, 1377 01:03:31,210 --> 01:03:32,650 where it's like-- 1378 01:03:32,650 --> 01:03:35,110 the thing about innovating in this sector 1379 01:03:35,110 --> 01:03:37,540 is that, you kind of Uberize it in terms of, 1380 01:03:37,540 --> 01:03:39,540 there's already an existing society. 1381 01:03:39,540 --> 01:03:41,730 There's already all these institutions that people-- 1382 01:03:41,730 --> 01:03:44,500 there's these pathways for this legacy sector. 1383 01:03:44,500 --> 01:03:47,020 So when you innovate in it, the issue 1384 01:03:47,020 --> 01:03:49,655 is going to be that you tear those down. 1385 01:03:49,655 --> 01:03:51,280 And these people will spend their lives 1386 01:03:51,280 --> 01:03:53,552 dedicating themselves to being part of the sector, 1387 01:03:53,552 --> 01:03:54,760 and you just cannibalized it. 1388 01:03:54,760 --> 01:03:56,950 So it's like, how do you really work with it? 1389 01:03:56,950 --> 01:04:00,130 And that's a policy issue, but it's also a whole social issue. 1390 01:04:00,130 --> 01:04:03,910 And I think Uber has been a good preliminary basic example, 1391 01:04:03,910 --> 01:04:04,410 because-- 1392 01:04:04,410 --> 01:04:06,720 it's pretty much an appetizer, or a warm-up example. 1393 01:04:06,720 --> 01:04:09,400 But if somebody did come up with an amazing innovation 1394 01:04:09,400 --> 01:04:12,340 in energy, like fusion that is relatively cheap 1395 01:04:12,340 --> 01:04:15,760 and won't take like 10 years to build a reactor, 1396 01:04:15,760 --> 01:04:18,160 then maybe something like that could happen. 1397 01:04:18,160 --> 01:04:21,060 Any other thoughts? 1398 01:04:21,060 --> 01:04:23,900 AUDIENCE: Maybe another good example, probably almost 1399 01:04:23,900 --> 01:04:24,610 more disruptive. 1400 01:04:24,610 --> 01:04:25,568 You mentioned gasoline. 1401 01:04:25,568 --> 01:04:28,340 It would be-- that's part of what makes Elon Musk a really 1402 01:04:28,340 --> 01:04:30,370 interesting change agent. 1403 01:04:30,370 --> 01:04:33,050 He's not just developing the electrics 1404 01:04:33,050 --> 01:04:36,602 that drive the car, but the charging stations that 1405 01:04:36,602 --> 01:04:38,060 will go in the house, and then even 1406 01:04:38,060 --> 01:04:40,700 connected to the solar roofing that will charge those 1407 01:04:40,700 --> 01:04:41,720 stations. 1408 01:04:41,720 --> 01:04:46,970 I think you put a lot of thought into, basically, the launch 1409 01:04:46,970 --> 01:04:49,100 pathway for that technology. 1410 01:04:51,913 --> 01:04:53,330 STEPH: That's a really good point, 1411 01:04:53,330 --> 01:04:57,377 because I think often about the energy value chain in the oil 1412 01:04:57,377 --> 01:04:59,210 and gas industry-- like upstream, midstream, 1413 01:04:59,210 --> 01:05:03,610 downstream-- and the flow of value within the industry, 1414 01:05:03,610 --> 01:05:04,447 and I feel like-- 1415 01:05:04,447 --> 01:05:06,530 I hadn't thought of that, that Elon is essentially 1416 01:05:06,530 --> 01:05:11,390 creating not only upstream change, but also midstream 1417 01:05:11,390 --> 01:05:15,710 change and downstream change, in that he's comprehensively 1418 01:05:15,710 --> 01:05:17,720 trying to transform the industry and capture 1419 01:05:17,720 --> 01:05:21,040 all of the value for himself. 1420 01:05:21,040 --> 01:05:24,765 But I definitely think that perhaps-- 1421 01:05:24,765 --> 01:05:26,790 or I don't know, maybe I'll pose this question. 1422 01:05:26,790 --> 01:05:31,478 do you feel like change happens more-- 1423 01:05:31,478 --> 01:05:33,270 or change is more feasible on the midstream 1424 01:05:33,270 --> 01:05:36,030 or downstream sector? 1425 01:05:36,030 --> 01:05:38,790 Because I feel like upstream is kind of that disruption. 1426 01:05:38,790 --> 01:05:41,550 It's trying to create fusion, which can be challenging, 1427 01:05:41,550 --> 01:05:44,990 and it can be difficult to have people adopt. 1428 01:05:44,990 --> 01:05:47,240 But then you get stuck at the midstream or downstream. 1429 01:05:47,240 --> 01:05:48,818 Do you want to change infrastructure, 1430 01:05:48,818 --> 01:05:50,610 or do you want to change consumer patterns, 1431 01:05:50,610 --> 01:05:51,770 is my question. 1432 01:05:51,770 --> 01:05:53,560 RASHEED: Steph, quickly define upstream, 1433 01:05:53,560 --> 01:05:56,713 midstream, downstream for me. 1434 01:05:56,713 --> 01:05:57,380 STEPH: Oh, yeah. 1435 01:05:57,380 --> 01:06:00,120 So upstream is just the production aspects of it-- 1436 01:06:00,120 --> 01:06:04,550 so the extraction of natural gas and oil. 1437 01:06:04,550 --> 01:06:07,190 So the derrick systems. 1438 01:06:07,190 --> 01:06:08,980 Midstream is the infrastructure that's 1439 01:06:08,980 --> 01:06:11,110 created in order to transport that-- so, say, 1440 01:06:11,110 --> 01:06:15,310 the railways, the trailers, the trucks, et cetera. 1441 01:06:15,310 --> 01:06:17,440 And then downstream is the consumer aspects of it-- 1442 01:06:17,440 --> 01:06:21,216 so the people buying it in their car at scale. 1443 01:06:26,640 --> 01:06:28,885 RASHEED: So I think what's interesting about this-- 1444 01:06:28,885 --> 01:06:30,260 and maybe particularly in energy, 1445 01:06:30,260 --> 01:06:32,970 but in other fields and other legacy sectors-- 1446 01:06:32,970 --> 01:06:36,160 creating these thinking communities of change agents, 1447 01:06:36,160 --> 01:06:39,150 which is the first step, is something 1448 01:06:39,150 --> 01:06:40,650 that you can't really-- 1449 01:06:44,400 --> 01:06:46,620 is there a way to organically do this? 1450 01:06:46,620 --> 01:06:48,870 Because I don't see getting together 1451 01:06:48,870 --> 01:06:50,850 the heads of all of the big energy 1452 01:06:50,850 --> 01:06:52,440 corporations together in a room. 1453 01:06:52,440 --> 01:06:56,220 They're not going to come up with anything super radical. 1454 01:06:56,220 --> 01:06:59,200 And so there's no-- 1455 01:06:59,200 --> 01:07:01,530 and it's way different from-- 1456 01:07:01,530 --> 01:07:03,697 before you could just get the Comptons, the Vannevar 1457 01:07:03,697 --> 01:07:05,113 Bush in the room, and you're going 1458 01:07:05,113 --> 01:07:06,680 to get something crazy out. 1459 01:07:06,680 --> 01:07:09,060 But now, if you're looking to innovate in a sector, 1460 01:07:09,060 --> 01:07:11,880 you can't really call upon the greatest minds pulled here 1461 01:07:11,880 --> 01:07:13,980 and then get something out. 1462 01:07:13,980 --> 01:07:16,470 AUDIENCE: Can you give me an example [INAUDIBLE] 1463 01:07:16,470 --> 01:07:18,500 just to [INAUDIBLE]? 1464 01:07:18,500 --> 01:07:21,940 AUDIENCE: Well, isn't MIT trying to create a thinking group, 1465 01:07:21,940 --> 01:07:26,070 or a space where thinking groups can occur, with The Engine? 1466 01:07:26,070 --> 01:07:28,900 Isn't that one of-- 1467 01:07:28,900 --> 01:07:31,453 WILLIAM BONVILLIAN: Yeah, or Mighty could be 1468 01:07:31,453 --> 01:07:32,870 and the Energy Initiative could be 1469 01:07:32,870 --> 01:07:35,840 seen as a thinking community. 1470 01:07:35,840 --> 01:07:37,280 It's not simply MIT-based. 1471 01:07:37,280 --> 01:07:41,660 It brings in all kinds of people from various sectors and places 1472 01:07:41,660 --> 01:07:44,360 to think through these big challenges. 1473 01:07:44,360 --> 01:07:47,280 And the big reports that MIT does 1474 01:07:47,280 --> 01:07:50,030 are the products of these thinking communities 1475 01:07:50,030 --> 01:07:52,940 as they attempt to think through a new technology area, 1476 01:07:52,940 --> 01:07:58,400 like solar or the future of the grid. 1477 01:07:58,400 --> 01:08:01,070 STEPH: [INAUDIBLE] did you interact 1478 01:08:01,070 --> 01:08:05,120 at all with the American Petroleum Institute? 1479 01:08:05,120 --> 01:08:07,220 SARAH JANE MAXTED: Well, not really. 1480 01:08:07,220 --> 01:08:08,810 It was there. 1481 01:08:08,810 --> 01:08:10,760 It was affiliated-- 1482 01:08:10,760 --> 01:08:12,063 I don't even know how. 1483 01:08:12,063 --> 01:08:13,730 I think it was out of Office of Science? 1484 01:08:13,730 --> 01:08:14,785 Or was it Fossil? 1485 01:08:14,785 --> 01:08:15,910 WILLIAM BONVILLIAN: Fossil. 1486 01:08:15,910 --> 01:08:16,993 SARAH JANE MAXTED: Fossil. 1487 01:08:16,993 --> 01:08:19,560 I think the Office of Fossil Energy has the relationship. 1488 01:08:19,560 --> 01:08:22,203 But we didn't interact with them at all. 1489 01:08:22,203 --> 01:08:24,370 STEPH: So I think an interesting example for Rasheed 1490 01:08:24,370 --> 01:08:27,109 within the legacy sector of oil and gas, 1491 01:08:27,109 --> 01:08:28,850 because I know API does a lot of work 1492 01:08:28,850 --> 01:08:31,520 in ensuring that the regulatory framework is there 1493 01:08:31,520 --> 01:08:32,840 for all of the oil companies. 1494 01:08:32,840 --> 01:08:34,910 And the heads of all the oil companies 1495 01:08:34,910 --> 01:08:38,540 get together as a group, or provide representatives 1496 01:08:38,540 --> 01:08:40,460 at meetings, and then they go through 1497 01:08:40,460 --> 01:08:45,260 and talk about the potential outcomes for the energy 1498 01:08:45,260 --> 01:08:46,939 industry, and then think collaboratively 1499 01:08:46,939 --> 01:08:50,120 about what that industrial framework might look like. 1500 01:08:50,120 --> 01:08:53,210 And obviously, there's a lot of those industries that 1501 01:08:53,210 --> 01:08:55,231 are trying to create disruptive innovations, 1502 01:08:55,231 --> 01:08:56,689 because that's the only way they're 1503 01:08:56,689 --> 01:08:58,481 going to win in the market in the long run. 1504 01:08:58,481 --> 01:09:00,147 SARAH JANE MAXTED: Well, I think there-- 1505 01:09:00,147 --> 01:09:00,770 so there are-- 1506 01:09:00,770 --> 01:09:03,979 I think something to think about. 1507 01:09:03,979 --> 01:09:06,365 Most applied programs in government have-- 1508 01:09:08,930 --> 01:09:10,760 what do you call them, working sessions 1509 01:09:10,760 --> 01:09:13,020 where they hear industry-- what do they call them? 1510 01:09:13,020 --> 01:09:13,520 Oh my god. 1511 01:09:13,520 --> 01:09:14,145 Peer reviews? 1512 01:09:14,145 --> 01:09:15,020 Oh, not peer reviews. 1513 01:09:15,020 --> 01:09:16,395 I don't know what they call them. 1514 01:09:16,395 --> 01:09:18,290 But it's basically where you bring together 1515 01:09:18,290 --> 01:09:23,263 the community of practice of all of the people 1516 01:09:23,263 --> 01:09:24,680 that make sense to bring together, 1517 01:09:24,680 --> 01:09:27,310 in solar and batteries or whatever, 1518 01:09:27,310 --> 01:09:32,090 and you have a conversation to identify pain points. 1519 01:09:32,090 --> 01:09:34,075 And all of the ERE does this. 1520 01:09:34,075 --> 01:09:35,450 The Energy Efficiency [INAUDIBLE] 1521 01:09:35,450 --> 01:09:38,840 office and I know most other applied programs 1522 01:09:38,840 --> 01:09:41,660 do as well, to kind of do that. 1523 01:09:41,660 --> 01:09:44,720 But I actually think-- to your point about, 1524 01:09:44,720 --> 01:09:47,390 does it really make sense to get all these execs in a room? 1525 01:09:47,390 --> 01:09:49,490 Are they really going to move the ball forward? 1526 01:09:49,490 --> 01:09:51,439 Is actually a really interesting question, 1527 01:09:51,439 --> 01:09:55,550 because I think we're starting to see more of the exevs 1528 01:09:55,550 --> 01:09:58,100 in the room with the midstream and the downstream, 1529 01:09:58,100 --> 01:09:59,650 and all of the-- 1530 01:09:59,650 --> 01:10:02,030 to actually be innovative, it can't just 1531 01:10:02,030 --> 01:10:04,350 be the CEOs of these companies. 1532 01:10:04,350 --> 01:10:06,950 It has to actually be different layers as well. 1533 01:10:06,950 --> 01:10:11,650 And I think that goes to this-- they can do this kind of model. 1534 01:10:11,650 --> 01:10:13,950 I don't know if that answered the question. 1535 01:10:13,950 --> 01:10:15,990 WILLIAM BONVILLIAN: So I'm going to need to-- 1536 01:10:15,990 --> 01:10:18,610 if we're going to get out of here, 1537 01:10:18,610 --> 01:10:21,280 I'm going to need to do a wrap-up of today. 1538 01:10:21,280 --> 01:10:24,600 And then I want to talk about next week's class, 1539 01:10:24,600 --> 01:10:27,022 because seven of you will be presenting, 1540 01:10:27,022 --> 01:10:28,980 and I just want to go through the dynamics of-- 1541 01:10:28,980 --> 01:10:30,195 that's going to be a different kind of class, 1542 01:10:30,195 --> 01:10:31,930 so I just want to talk about that. 1543 01:10:31,930 --> 01:10:33,930 But before we do that, Rasheed, why don't you 1544 01:10:33,930 --> 01:10:37,440 lay out you know some closing thoughts for us on this piece? 1545 01:10:37,440 --> 01:10:38,035 RASHEED: Yeah. 1546 01:10:38,035 --> 01:10:39,660 So I didn't get to it, and I was hoping 1547 01:10:39,660 --> 01:10:40,952 to, actually, another question. 1548 01:10:40,952 --> 01:10:45,180 But another idea that everybody had 1549 01:10:45,180 --> 01:10:48,330 was identifying policy and policymakers 1550 01:10:48,330 --> 01:10:51,540 to give this impetus towards making these changes, 1551 01:10:51,540 --> 01:10:54,090 and making these changes more politically 1552 01:10:54,090 --> 01:10:56,250 favorable and apparent. 1553 01:10:56,250 --> 01:10:58,730 And it's difficult in these legacy sectors 1554 01:10:58,730 --> 01:11:00,480 because, I think, you're facing and you're 1555 01:11:00,480 --> 01:11:02,822 up against powerful vested interests. 1556 01:11:02,822 --> 01:11:04,530 And I think it's just, to Martin's point, 1557 01:11:04,530 --> 01:11:08,190 making the case for, maybe I don't have fusion yet, 1558 01:11:08,190 --> 01:11:11,910 but it's making it socially applicable or politically 1559 01:11:11,910 --> 01:11:16,402 palatable to say, if we invest here and get this fusion, 1560 01:11:16,402 --> 01:11:18,360 we can make this change that can be politically 1561 01:11:18,360 --> 01:11:19,710 favorable for everybody. 1562 01:11:19,710 --> 01:11:23,418 And so I think looking at policy incentives, 1563 01:11:23,418 --> 01:11:24,960 you have to think a little bit bigger 1564 01:11:24,960 --> 01:11:28,770 than just what is scientifically or technologically possible. 1565 01:11:28,770 --> 01:11:31,198 But I think this is a great piece, 1566 01:11:31,198 --> 01:11:33,740 and this is was a great piece for us because it encourages us 1567 01:11:33,740 --> 01:11:37,855 to not only think about innovation systems as being 1568 01:11:37,855 --> 01:11:40,230 differentiating-- you can do different things but achieve 1569 01:11:40,230 --> 01:11:41,160 the same result-- 1570 01:11:41,160 --> 01:11:44,460 but also, a lot of people have to buy into and get on board 1571 01:11:44,460 --> 01:11:46,200 and be coordinated in their actions 1572 01:11:46,200 --> 01:11:49,110 to achieve feasible and long-term change, 1573 01:11:49,110 --> 01:11:50,910 because we have a lot bigger problems 1574 01:11:50,910 --> 01:11:52,998 than we did 50 or 100 years ago. 1575 01:11:52,998 --> 01:11:54,540 WILLIAM BONVILLIAN: And a lot of them 1576 01:11:54,540 --> 01:11:56,940 are tied to these legacy sectors. 1577 01:11:56,940 --> 01:11:58,080 Thank you. 1578 01:11:58,080 --> 01:12:01,320 So I'm going to do a quick wrap-up of this class. 1579 01:12:05,280 --> 01:12:08,880 So our backdrop was Donald Stokes and Pasteur's Quadrant, 1580 01:12:08,880 --> 01:12:12,450 and that led us into Branscomb and Auerswald. 1581 01:12:12,450 --> 01:12:17,650 And their underlying-- the focus of innovation policy, frankly, 1582 01:12:17,650 --> 01:12:22,073 for the last 25 years has been on the problem 1583 01:12:22,073 --> 01:12:24,240 that they write about, this valley of death problem. 1584 01:12:24,240 --> 01:12:26,260 And how do you get across it? 1585 01:12:26,260 --> 01:12:28,390 But one thing I want to be clear about today 1586 01:12:28,390 --> 01:12:32,680 is, the valley of death is only one piece of a larger 1587 01:12:32,680 --> 01:12:35,500 innovation system which stretch a lot further than just 1588 01:12:35,500 --> 01:12:37,570 research and development, and we've 1589 01:12:37,570 --> 01:12:41,350 got to think about the gaps in that system overall. 1590 01:12:41,350 --> 01:12:42,910 But Branscomb and Auerswald really 1591 01:12:42,910 --> 01:12:46,300 lead us into this foundational problem. 1592 01:12:46,300 --> 01:12:51,220 And a valley of death is essentially a linear view, 1593 01:12:51,220 --> 01:12:54,220 and they also point out that, hey, the system is really not 1594 01:12:54,220 --> 01:12:54,820 linear. 1595 01:12:54,820 --> 01:12:56,120 It's more complex than that. 1596 01:12:56,120 --> 01:12:58,660 It's this Darwinian sea. 1597 01:12:58,660 --> 01:13:04,210 Ruttan describes for us this parallel universe. 1598 01:13:04,210 --> 01:13:07,480 We have a set of civilian basic research agencies, 1599 01:13:07,480 --> 01:13:10,510 and then we have a very differently organized set 1600 01:13:10,510 --> 01:13:14,350 of defense R&D agencies and mission agencies. 1601 01:13:14,350 --> 01:13:15,940 And they are very different systems, 1602 01:13:15,940 --> 01:13:18,190 and one is, from an organizational point 1603 01:13:18,190 --> 01:13:20,950 of view purposely disconnected. 1604 01:13:20,950 --> 01:13:23,620 The other is purposely connected, 1605 01:13:23,620 --> 01:13:25,900 and they are different worlds. 1606 01:13:25,900 --> 01:13:29,517 We have gotten a lot out of that defense innovation system. 1607 01:13:29,517 --> 01:13:31,600 We don't normally think about it or talk about it, 1608 01:13:31,600 --> 01:13:34,120 but the results are quite powerful. 1609 01:13:34,120 --> 01:13:37,810 Glenn Fong told us about the models 1610 01:13:37,810 --> 01:13:40,120 that DoD uses when it's actually going 1611 01:13:40,120 --> 01:13:43,690 to play a role in civilian sectors, 1612 01:13:43,690 --> 01:13:46,960 and laid out the byproduct model, the spin-off model, 1613 01:13:46,960 --> 01:13:49,260 the dual-use model, the industrial base model. 1614 01:13:49,260 --> 01:13:53,890 So these are all models the DoD uses in practice. 1615 01:13:53,890 --> 01:13:56,320 We looked at In-Q-Tel, which in some ways 1616 01:13:56,320 --> 01:13:59,560 is the most extreme model of governmental intervention 1617 01:13:59,560 --> 01:14:02,110 into the private sector, because it will actually 1618 01:14:02,110 --> 01:14:04,540 play the role of being a venture capital firm 1619 01:14:04,540 --> 01:14:08,410 and take ownership positions in companies that it wants 1620 01:14:08,410 --> 01:14:12,250 to encourage innovation in. 1621 01:14:12,250 --> 01:14:16,390 We talked about the new model innovation agency piece. 1622 01:14:16,390 --> 01:14:20,830 Essentially, the idea here is that the system isn't static. 1623 01:14:20,830 --> 01:14:23,920 It isn't standing still from the time Vannevar Bush created it. 1624 01:14:23,920 --> 01:14:27,280 It has been changing pretty dynamically over time. 1625 01:14:27,280 --> 01:14:29,800 And these outside crises-- 1626 01:14:29,800 --> 01:14:31,960 the competitiveness challenge in the 1980s, 1627 01:14:31,960 --> 01:14:36,710 the Sputnik challenge of the later part of the '50s, 1628 01:14:36,710 --> 01:14:40,180 the energy technology challenge, now this advanced manufacturing 1629 01:14:40,180 --> 01:14:42,520 challenge-- these are all external elements 1630 01:14:42,520 --> 01:14:45,190 that have been driving change in the US system 1631 01:14:45,190 --> 01:14:50,640 and pushing its model to be more of a connected model. 1632 01:14:50,640 --> 01:14:52,890 And then the final reading was about innovation 1633 01:14:52,890 --> 01:14:56,130 in legacy sectors. 1634 01:14:56,130 --> 01:15:00,450 As we discussed just now, many of our deep societal problems 1635 01:15:00,450 --> 01:15:03,270 are tied up in these legacy sectors. 1636 01:15:03,270 --> 01:15:05,580 And these legacy sectors need innovation, 1637 01:15:05,580 --> 01:15:09,210 and they resist it inherently in their model. 1638 01:15:09,210 --> 01:15:12,120 And how do you think about innovation organization that's 1639 01:15:12,120 --> 01:15:15,970 going to start to bring new technology 1640 01:15:15,970 --> 01:15:18,340 advances, new innovative advances 1641 01:15:18,340 --> 01:15:20,230 into these legacy sectors that they 1642 01:15:20,230 --> 01:15:22,750 will be disruptive of their business models? 1643 01:15:22,750 --> 01:15:24,250 How do we start to think about that? 1644 01:15:24,250 --> 01:15:27,310 Because we're now into that project, 1645 01:15:27,310 --> 01:15:30,520 and we need to much more systematically organize 1646 01:15:30,520 --> 01:15:33,970 our innovation organization approaches to cope with it. 1647 01:15:33,970 --> 01:15:37,550 So that takes us through class 6. 1648 01:15:37,550 --> 01:15:39,928 Next week is going to be a different kind of class, 1649 01:15:39,928 --> 01:15:42,220 because you guys are going to own it much more than I'm 1650 01:15:42,220 --> 01:15:43,360 going to own it. 1651 01:15:43,360 --> 01:15:45,850 So seven of you will be presenters. 1652 01:15:45,850 --> 01:15:48,710 I'm asking that-- and I've got pretty detailed directions 1653 01:15:48,710 --> 01:15:49,710 in describing the class. 1654 01:15:49,710 --> 01:15:51,700 If you've got questions, let me know. 1655 01:15:51,700 --> 01:15:54,880 But divvy up the innovation organization groups 1656 01:15:54,880 --> 01:15:56,200 you want to present on. 1657 01:15:56,200 --> 01:15:59,390 And as we discussed a few weeks ago, 1658 01:15:59,390 --> 01:16:01,990 I'd love to have innovation groups that 1659 01:16:01,990 --> 01:16:04,510 were based on other than dead white males in the group. 1660 01:16:04,510 --> 01:16:08,350 So if somebody can find some, fine. 1661 01:16:08,350 --> 01:16:09,490 And talk to me about them. 1662 01:16:09,490 --> 01:16:11,978 I may be able to help you on sources. 1663 01:16:11,978 --> 01:16:13,270 If you can't, that's fine, too. 1664 01:16:13,270 --> 01:16:16,240 And these are very interesting groups, so it's going to be-- 1665 01:16:16,240 --> 01:16:20,170 whichever one you pick, these are very interesting stories. 1666 01:16:20,170 --> 01:16:22,560 I think we'll have fun with them. 1667 01:16:22,560 --> 01:16:25,330 And the great group model takes us-- 1668 01:16:25,330 --> 01:16:27,910 we've been talking about institutional innovation. 1669 01:16:27,910 --> 01:16:30,430 We talked a lot about that today. 1670 01:16:30,430 --> 01:16:32,740 Innovation at the institutional level. 1671 01:16:32,740 --> 01:16:34,720 But innovation belongs to people, 1672 01:16:34,720 --> 01:16:37,270 and they organize themselves in groups, 1673 01:16:37,270 --> 01:16:39,520 and we have to understand the dynamics of those groups 1674 01:16:39,520 --> 01:16:40,840 as well. 1675 01:16:40,840 --> 01:16:43,400 So that's what the object of the class is. 1676 01:16:43,400 --> 01:16:45,010 So I'm going to ask the presenters 1677 01:16:45,010 --> 01:16:49,900 to do three or four slides on your group, and tell us 1678 01:16:49,900 --> 01:16:52,360 what they accomplished, what they did. 1679 01:16:52,360 --> 01:16:59,670 Tell us what-- the rules that they followed from the Bennis 1680 01:16:59,670 --> 01:17:01,670 and Biederman framework, which is 1681 01:17:01,670 --> 01:17:03,530 one of the several foundational readings 1682 01:17:03,530 --> 01:17:04,940 that everybody should read. 1683 01:17:04,940 --> 01:17:06,920 What were the rules that they followed? 1684 01:17:06,920 --> 01:17:09,520 And then what is a new rule or two 1685 01:17:09,520 --> 01:17:12,590 that you see them doing that's different in the Bennis 1686 01:17:12,590 --> 01:17:13,850 and Biederman rule? 1687 01:17:13,850 --> 01:17:16,670 What's different about your particular group 1688 01:17:16,670 --> 01:17:21,040 that contributes to our thinking about how great groups operate?