LØRN case C0353 -

Marianna Mazzucatto

Professor in the economics of innovation and public values


Problem based innovation

In this episode of LØRN, Silvija talks to professor in the economics of innovation and public values at UCL, Mariana Mazzucato, about why we must optimize stakeholder value and not just shareholder value, in addition to what we should know about taking risks and being innovative in the public and private sectors. UCL Professor, Director of Institute for Innovation & Public Purpose. Mariana, an author, focuses on the relationship between innovation and the direction of growth, with emphasis on rethinking the public sector’s role to ensure growth is more innovation-led, inclusive and sustainable. She works with global leaders on 'mission oriented' policies which can steer solutions towards grand challenges from the battle against global warming to building resilient health systems.
LØRN case C0353 -

Marianna Mazzucatto

Professor in the economics of innovation and public values


Problem based innovation

In this episode of LØRN, Silvija talks to professor in the economics of innovation and public values at UCL, Mariana Mazzucato, about why we must optimize stakeholder value and not just shareholder value, in addition to what we should know about taking risks and being innovative in the public and private sectors. UCL Professor, Director of Institute for Innovation & Public Purpose. Mariana, an author, focuses on the relationship between innovation and the direction of growth, with emphasis on rethinking the public sector’s role to ensure growth is more innovation-led, inclusive and sustainable. She works with global leaders on 'mission oriented' policies which can steer solutions towards grand challenges from the battle against global warming to building resilient health systems.

38 min

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Velkommen til Lørn.Tech – en læringsdugnad om teknologi og samfunn med Silvija Seres og venner.

SS: Hello and welcome to Lørn, my name is Silvija Seres and our topic today is business and social aspects of technological change, and I have a wonderful guest today. This is Marianna Macuzatto, professor of economics at university college London, one of my big heroes actually. Welcome!

MM: Thank you very much, I am very happy to be here.

SS: Marianna, I had a sort of an epiphany when I read your entrepreneurial state, and I have been feeling guilty and a little bit too revolutionary when I’ve been pushing these ideas before I read your book, because I was always feeling that we have to have the courage to focus, because if we try to do everything then digitalization becomes nothing, and then I read the entrepreneurial state and the value of everything where I think also you explained really well why traditional economic models and social models do not work well with these data-driven economy, and many things fell in place, so we’ll try to see if we can get some of that in fifteen minutes.

MM: Ok, with our red wine which the listeners don’t see.

SS: Yeah, which helps. So, shall we start with: why are things different now? how is data-driven economy different from industrial economy?

MM: So, to be honest I don’t believe in that difference. At least not how people describe these big changes in for example the modern knowledge economy and data-driven economy, how for example it’s driven by increasing returns to scale as opposed to the old assumptions about decreasing returns, I think that even the old world was much more interesting than we described it, if you just look at the automobile industry, the first autos basically came out at the end of the 1800’s, there was about 3000 different startups, of which only 300 actually created a car, only 30 actually sold it, and only 3 survived. This is for the US economy, and if you look at the massive experimentation that there was around car production, there was literally, if you just look at the design of these cars, they were so different, one from the other. And then you got standardization, and once the model T came out, then you got all sorts of different economics, but that early experimental, really creative dynamic phase actually has a lot of the characteristics that today’s kind of knowledge driven economy has, and I think the real question is, why do we continue to use such static models to describe what is inherently a very diverse and dynamic system? So, capitalism, unlike feudalism, which was basically 500 years ago in Russia is driven by, so competition is driven by firms, companies trying to differentiate themselves, one from another, and innovation is a key driver of that differentiation, and yet we have economic models that continue to obsess about the average company, about unique equilibria, about concepts of optimality.

SS: But even the way we text these companies are concept of value, I think is a bit outdated, because it’s very much related to physical things or you know some derivative of that, while now we have data that you don’t know how to tax or measure.

MM: Even before the data question, I think the real issue is that many of these you know data companies, whether you take the ones that are stills small or the big ones like Google, they were able to emerge, survive and scale up, you know because we obsess about startups. A really interesting thing is what allows companies to scale up, through a hole social and collective system around themselves, and so that’s why I personally don’t believe in the word entrepreneur, I believe in entrepreneurial systems and there, there is a tax question as well. Do you, you know how do you actually tax a company in such a way that rewards also the system around them as opposed to just sassing and assuming that a company is successful because of the genius leader. I mean, look at, you know Elon Musk is a perfect example. He is an individual who has three companies and those three companies received 5 billion dollars from the US government, even the capabilities, literally the knowledge inside SpaceX, which in some ways is also a data-company in terms of if you look at how they think about space and where their understanding of the space economy comes from, and the early capabilities inside SpaceX actually came from NASA scientists and what’s happening today is that by just looking at parts of the system, as opposed to looking at the whole collective and social system around great companies we end up actually not investing in the capabilities and capacities for example within the public infrastructure, and NASA itself is suffering today. I think hemorrhaging talent, people no longer necessarily want to work there, they prefer to go inside Google because we describe Google as a value creator, and at best we talk about the public institutions as important for fixing market failures, for creating public goods that might even be a public infrastructure like international space station or other forms of infrastructure, but we don’t have a way to talk about public value, we know how to talk about private value, but if we look at collective value that requires a different understanding and thinking about taxation, I don’t think we should think about taxation in terms of “is it high or is it low?”, it should be driven by what kind of behavior do we want to also incentivize, because to be honest, most countries actually don’t even need taxation in order to make ambitious public investments so when we go to war no one says “Oh, we don’t have tax money, we cant go to Afghanistan, we cant go to Iraq, we can’t fight world war 2” They just go to war. They don’t ask if there’s money, and what you need taxation for is to incentivize the types of behaviors you want, so for example if you want companies today to be investing in renewable energy or in a transition of their own sector, like steel. The steel sector in Germany has lowered it’s material content through repurposes for recycle, they were incentivized to do so through the government.

SS: So, if you tell us the main ideas then, from the entrepreneurial state, it lines up with that right?

MM: Yeah, I mean everything that makes you have a phone in front of me right now, it’s your smartphone, everything that makes that smartphone smart were public investments. Internet, GPS, Siri, touch-screen display, but this wasn’t just public money being thrown at things, there was an organizational capacity within those organizations. DARPA for the internet, the navy for GPS, the CIA, believe it or not was the main funder of touch-screen display, so the real question is: in the private sector and in the public sector, what do we know about the organizational capacity to experiment, to explore, to take risks, to welcome uncertainty instead of fearing it, and the irony is that we kind of understand those issues and the private sector, because that’s where we have business schools and these great courses like strategic management, but in the public sector, because we assumed that at best it can fix market-failures or redistribute wealth through taxation. We haven’t thought about these really important dynamic issues, and in a country like Norway which has so much, if you want public wealth from petrol, the real question is you have suborned wealth-fund for example. How should it be organized? What should drive its investments? How should they think about the risk-reward relationship, given that it’s a public structure? What do we mean by public value? What is public purpose? These questions are so undertheorized. They are very static, and so we don’t get the level of ambition we should have in a country like Norway with this immense public wealth, it basically ends up just getting invested in real estate.

SS: Or oil in our case, and energy, but you’re right, so how do we actually get politicians to start wanting to do these things as a part of their party programs, etcetera, because there has been incredibly traditionalist positioning within the parties, and it is you know about redistribution of the value of production capital, labor capital, at best. Or it will be some very narrow topics, like I don’t know. Look at the big split in the US and I’m always amazed at how much you know politics you can build out of the abortion question, or rather than the entrepreneurial question. We don’t know how to translate what you’re talking about into values that people know how to feel about, and how does one make constructive politics out of this?

MM: Yeah, so one of the things that I’ve been dedicating quite a bit of time to in the last two years is this concept of missions, so if you think about what got us to the moon and back again in a generation, it was a very concrete mission to do that.

SS: No business plan?

MM: Well, it was addressing a challenge, because we should dibranchiate these words. The challenge at the time was the spacerace and sputnik, getting to the moon and back again was a very concrete vision which came from the Kennedy administration. To achieve it, they needed 12, 13, 14 different sectors to innovate and invest, it was not just aeronautics, it was also textiles, materials, nutrition.

SS: Can I ask you a breaking question?

MM: Yeah.

SS: Did they actually think about it in terms of innovation, or did they think about it in terms of the race?

MM: No, that’s the point. No, they thought about it in terms of race, which was the challenge, the space race, but the problem was very concrete, it was getting to the moon and back again in one generation, and they had to transform their structure, so for example procurement, which means government purchasing power, whether you are purchasing desks for school, beds for hospital or materials in rocket, you can transform your procurement policy to really drive the innovation, to welcome bottom up solutions, lots of different solutions, experimentation, and that’s one of the lessons that the moonshot gives us, which is intersectoral, interactor, interdisciplinary, if you think about investments, but also the transformation of instruments, instead of being static about cost-benefit analysis, net present value, being really outcomes focused, but also using price schemes, grants, loans, procurement to drive through the bottom up experimentations, innovation dies when it’s topped down, but you do need a vision at the top, and the question today I think is: what is the equivalent of these moon shots around the social problems that we have, the societal challenges that we have?

SS: Which are?

MM: Climate change, health-systems that are really stressed, and instead of asking: “oh is the wealth restate of the past?” We could be asking ourselves: “what is the modern form of the 21st century wealth restate and how can the tentacles of the state through health and transport and education really drive through innovation again?”. The internet was a solution to a problem, the satellites had to you know communicate GPS was a solution to the problem, we needed to know where the ships were, the seas. What are the problems today, and how can we use this outcome spaced results driven mission-oriented framework to guide the roadmapping on how to really achieve these problems? and I don’t think that’s how the government thinks, and definitely that’s not how the private sector interacts with governments.

SS: So, Marianna, I know we are now just doing kind of philosophy but how does one find the political courage to set a challenge like that, because you know that people will say is: well, there is so many breakthroughs in technology, and there is so much going on, and there is so many things we shouldn’t be doing, and yet I don’t think the moonshot would happen, unless they actually chose one thing.

MM: Exactly, so one of the issues is, and I really think this is important, because the sustainable development goals are seventeen of them, those are challenges. They’ve been signed up to by over a hundred countries, which is really a unique moment in history. That never happened in the past, but they’re challenges, they’re broad challenges. You know zero hunger, cleaning the oceans, etcetera. How do you then transform them into really concrete targets, for example with the oceans one, which is STG13, what does it mean to get the plastic out? A plastic-free ocean, so it’s very concrete, it’s a target. You can say yes or no, did you achieve it? Is there still plastic in the ocean or not? And I don’t know if you saw the blue planet, a documentary by David Attenborough, the last episode really got children all over the world understanding you know when little baby dolphins are choking because they’re eating a you know, swallowing this plastic, it means that we also need to think about how the arts can engage citizens and really kind of getting behind some of these missions like with the moonshot there was a famous story of the janitor inside NASA who thought that he too was you know part of the solution, which of course he was. He was working in an inspirational, mission-driven organization, so I’ve noticed this in London where I live and I have four children and all their friends know about the plastics problem, but that’s because of that film. So one of the big questions I think for society and parties as you were saying the politics is how do you really engage citizens, listen to citizens, including movements, social movements, like the green movement, which in Germany brought the sustainability issue to the four of the political process then Merkel kind of captured it and used it to drive the Energiewende mission, which required investment in innovation across many sectors and bottom-up solutions, like the one I mentioned around steel, those are the questions. Who sets the missions? Is it really like a Kennedy moonshot, one guy and his, you know, men friends? Or is it somehow something more engaging, something more democratic to how do you really get lots of different sectors to focus on that, on achieving that and being rewarded to do so, so you don’t do handouts to coal, or to steel or to the automotive or even the digital sector, the life sciences sector, it’s not a handout, it is conditional loan transformation, and three, how do you really use the full power of government, for example procurement and price-schemes to drive through the bottom-up experimentation, because the Soviet system failed, because it was top-down, but it also fails if everything is bottom-up, it’s this tension, this dynamic, interesting tension between a top-down vison which ideally would also been initially set by engagement and the bottom up experimentation where you really let all flowers bloom, most of which will fail. Most of the projects ended up leading us to the moon, three-hundred or whatever projects, many of them failed, so how do you welcome risk-taking, trial and error, and error, and error, but learn from those errors?

SS: But what fascinates me is the way we manage research these days is very much, you know it’s all openness and it’s all top-down.

MM: Sorry, is it open or is it top-down?

SS: Well, both. The problem is that then you ask people to start with a business plan that somehow lines up with this top-down goal and I really don’t think that’s how innovation happens, I think it happens when you have a particular problem, a challenge that you just start obsessing about and then you start infecting other people around you with the same obsession and eventually there is a movement and eventually you know maybe from an unexpected development somewhere in a chemistry-lab or somewhere, there will be a thing that makes it happen.

MM: Yeah, so I totally agree with you and that’s what I was trying to say, which is that this is you know innovation has been historically driven by problems that people set themselves, and groups set themselves, and systems have set themselves, that had to be solved. Again, the internet was a solution to a problem, they didn’t think about the internet as a thing in itself, but what makes these things matter is when they are actually problems that are also really important right, so there’s you know, you could even see twitter in some way as the solution to a very narrow problem, but how can we get the full power today of bigdata, the AI, of quantum-computing to be used and to look at those areas, not a sector or technologies, but as parts of the solution towards you know, whether it’s thinking about how can Alzheimer’s patients be completely independent in their homes, whether it’s the plastics in the ocean problem went, whether it’s carbon-neutral cities. At least from the government side, the real issue is “keep your eye on the prize” what is the big problem you have to face? and this is why cities by the way end up often being the vehicles for innovation, they have very concrete problems, sewage run, transport, getting people from point a to point b, getting people with disabilities to use for example a public transport system. Those are really inspirational challenges, but if then the instruments you have are really boring and static, and all about cost-benefit and linear, then that’s not going to drive innovation, so I really believe we have to transform the instruments we have, at least in governments to become more dynamic and the private sector shouldn’t see itself as a lone little group of garage thinkers, but if you look at for example bell labs which was one very important private laboratory inside AT&T, that would have never happened without government also putting pressure on AT&T to reinvest their profits, back into the real economy, innovation, big innovation on telecoms. We don’t have that kind of pressure anymore, we just have large monopolies hoarding cash, there is over two trillion euros being hoarded in Europe, over three trillion dollars being used for share buybacks by the fortune 500 companies the last ten years, that’s a really raw deal.

SS: My impression from having worked with some of the really big guys in Silicon Valley before this generation is that it’s not actually governments that forced the Bell labs or Zerospark or the SRC, or you know the early Stanford labs or the Minsky team, but there were individuals that had a huge kind of social conscious and an incredible ability to solve problems in a team in a very kind of uncompromising manner, and I think having you know, I miss those individuals now.

MM: But they exist, what doesn’t exist is the pressure on the organizations that those individuals form to remain functional, they quickly get dysfunctional. It has always been about individuals, whether it’s in government or in private sector or in the third sector, if you don’t have really bright people willing to take risks and to think differently and to work with each other in collaborative ways then you don’t get innovation, that’s for sure, but the labs did, I mean this is just a fact, come out of a time when government was not willing just to give a monopoly. You know AT&T was a monopoly, they had a government monopoly, it was just a fact, that’s a contract. They had the government monopoly, the government was brave enough to say: “to retain your monopoly status, you have to reinvest”, now how they formed bell labs, who worked in bell labs, how they worked together is exactly what you described, amazing individuals, but the fact that AT&T, a huge company was willing to reinvest their profits into something like Bell labs, absolutely came from pressure from government. They couldn’t retain the monopoly without doing it, then how they set up Bell labs, we need to go look and there’s you know the famous book on the idea’s factory, and it is just absolutely the story you told, and there is not enough of those people, but actually I think what is really missing is a healthy symbiotic relationship between public and private today.

SS: Exactly, so from this part so far we’re talking about start with looking for first the problem and then gather people to find the solution to that problem.

MM: Yeah.

SS: And you have to have structures and incentives for risk-taking and innovations, it has to be also bottom-up in order to get the country on fire to solve something.

MM: And reward the people who have ideas as opposed to an appetism.

SS: The risk taking and the silo-problems between the different departments and so on. What are the main premises in the value of everything? How are things different and let me just start with entering the topic that kind of got me thinking and maybe again, maybe I’m misunderstanding, but I love the big Silicon Valley companies because they are very smart and they have very good products, but there is something that’s happening almost politically and socially in the way that they accumulate power, and the way that these things work today with you know Bill gates and the Google founders and the Facebook founders etcetera is that you know they have earnt so much money and now they are solving social problems of their own choice, beat malaria in Africa or whatever, that just doesn’t seem to be the way it should be working, globally or nationally. And why has this even been possible in such a short amount of time?

MM: Well, first of all, just to take the last bit you said which is that you have these very strong powerful companies with massive you know cash piles making these decisions of how we solve problems. That kind of brings us back to the middle ages if you think about it, where you had the kings and the queens having their court and bringing in the artist of their choice to paint beautiful things, and then what we had for centuries after that was this idea that actually a peer-reviewed process, scientific processes of scientists coming together to also judge each other’s works to review, to peer-review each other’s work was actually a better way to decide the evolution of science, it wasn’t the king and the queen just having a lot of money to say “oh you beautiful artist” or “you great scientist do this cute little pet project for me”, there is a system, and when that was really based on excellence and I think that is in fact how silicon valley emerged, I mean if you look at much of the system behind these top universities, being driven also by you know different types of peer-review, the national science foundation also was behind Google’s algorithm, the algorithm that actually built up Google was funded by the national science foundation as well as public institutions like DARPA which alongside the private sector made very important investments like the ones we mentioned before. That is very different from the system we have now, where we have allowed from deregulation very weak tax-systems and a reward-mechanism which is just, you know in some way socializing risk with privatizing rewards allowing these massive cashpiles to form within specific companies which are great driven by wonderful people, you know, yes they are very smart but they are not working alone, as I mentioned before, there is a system around them that doesn’t also get rewarded, then that ends up I think fueling a system which is very hard to reproduce itself, because we’re not allowing the rewards from this collective value creation to be as distributed as the risks that we’re taking.

SS: Explain, how are the risks?

MM: Collective.

SS: I think that’s a very central point here, socializing risks.

MM: And socializing rewards, so if these companies really lived in silos, if Google hadn’t received a national science foundation, if Elon Musk had not received 5 billion you know dollars from the US government, if even Apple had not received a very early grant which they received through the SBIC program, then we could say: “leave them alone, let the companies do whatever they want'', if they weren’t using the roads and the educated work force, but these are actually collective systems and forget socialism, I’m talking about the advanced former capitalism. These are companies that succeed both because of the great individuals who choose to work in them, but also because they are parts of a very functioning system, again, go back to the Soviet union, they did lots of research, lots of r&d, some of the best science in the world was in, you know the Soviet union, but they didn’t have systems of the innovation, they didn’t have the horizontal linkages between science and industry, they didn’t actually have the diffuse, if you want tentacles that went out into the economies of this great innovation.

SS: Which is what markets do.

MM: It’s not just markets, it’s also institutions, so for example in Japan at the same time in 1980’s they were spending less on r&d then the Soviet Union, so the r&d GDP ratio was lower, but they really had very interesting horizontal institutions. Germany has the catapult, sorry, the Fraunhofer institutes, the Max Planck’s center which are places where science and industry meet. In the US, there are specific ways like through the DARPA type institutions, where science and industry meet, these are horizontal institutions, meaning they are in-between the innovation chain, it’s not just great science.

SS: So, as you say, we have these advanced systems and networks in a way, that provide you both with socializing risk, and these osmosis effects between innovation, but then there is a problem with privatizing rewards, and it’s not really the companies themselves that just hoard the cash, I think it’s Freedman that says, you know, you’re business is business, and basically you have to pay dividends.

MM: Well, maximizing shareholder-value, yeah, which is of complete farse, in other words, it’s just a story that was told that people believed. It’s built on this assumption that only shareholders are the biggest risk-takers, they are the so-called residual claimants, the idea that everyone else has a guaranteed rate of return, and only the shareholder is risking to get nothing so workers have their salaries, banks get their interest payments and the shareholder-risk is getting nothing, so when there is a big booty at the end of say the biotech revolution, the dot com revolution, the clean-tech revolution, which is happening today, then they deserve somehow this big pot at the end, because they were the only ones who took risks, but that’s completely false. The government takes huge risks for every internet there was you know twenty failures, for every tesla which received 500 million and a guaranteed loan by the government, you have many Solyndra’s which had the same amount of money but failed, workers take risks when you enter working in a company and you think you have a life-long career, but you have no life-long career, you could get fired, at least at the most parts in the world. I think that the Scandinavian countries and Norway, the discourse has been more challenging is that even though you have redistributive policies and a kind of a social democratic idea behind that, that’s not enough. When I say socialize the rewards, I mean literally, socialize the rewards based on the actual contribution, that the different value creators and the different risk-takers took. It’s not just about the state coming in and redistributing the wealth-creator and the private sector. The really dynamic and functioning societies, one that can open the possibilities of being a value-creator amongst many different types of actors in economy, and those different types of actors should be also rewarded for the different types of risks they’re taking. If we mythologize mantra capital, mythologize you know the entrepreneurs inside their garages etcetera, we end up dismissing and not paying attention to a much greater collective effort around them, which doesn’t mean everyone’s the same, you know, there are some really particular, incredibly smart and able individuals, so it’s not to say everyone’s the same, but by not understanding the system of innovation that is required and that’s what the US government used or the US, the country used to have, a dynamic system of innovation, and by the way Trump is the first US president who’s actually dismantling it. So Ronald Reagan increased the funds massively, of organizations like the national institutes of health, which continued to spend over 30 billion a year, again the SBIR program, the DARPA kind of institutes. Trump, the first thing he did in his first year of being president, the first thing he went after in the US government was ARPA-E, which is the equivalent of DARPA but in the department of energy, which is really smart, if you want to dismantle the state, you don’t cut the budget, you cut the organizational capacity, but in terms of socializing rewards, I just think it requires a different understanding of value, so definitely shareholder value, or this idea that value is only created in companies in the state is there just to fix the pieces along the way, doesn’t describe what got us, again, everything in our Iphones.

SS: So, in a very, very simplistic way, you know, it takes a village to create a child, or to bring up a child, and it takes a village or a society to create successful companies and innovations, and we should think about not just you know optimizing shareholder-value, but somehow optimizing stakeholder-value, which involves all these supporting actors.

MM: And they are not just supporting, they are risk-taking actors. This is the point, even though we are supporting, as important as it is, these are actually different organizations or also individuals, but let’s just look at the organizational component. They were willing to take risks, and I think that word is very important, because the narrative about who the value-creators are is often associated with who the risk-takers are, and as long as we just continue to pretend that value and risk-taking isn’t one place and the others are just supporting or enabling them, then that actually replicates the false storytelling, which you require to get really interesting innovation. It’s different types of public and private, increasingly third sector organizations willing to take risks, willing to also invest in their own capacity instead of just outsourcing all the knowledge, and to do that, you also need to pay attention to not just the money and finance, but to the organizations in place, and that’s why through the institute that I’ve set up in UCL on innovation and public purpose were bringing together global organizations in the public sector which actually are rare. They are willing to rethink public services, willing to take risks, willing to have portfolio approach for example, to agree in transition, working of course alongside the private sector, but their organizational structure is as ambitious as the organizational structure within businesses, and that’s very rare, so must countries don’t have this.

SS: So, towards the end of our conversation, if we focus on Norway, is there anything that strikes you as semi-obvious in terms of what should Norway focus on, how should we create these platforms for innovation? I mean we actually have very benevolent politicians, we have a lot of money, we have a high level of knowledge, and really interesting private sector, that is used to collaborate. What could be you know, our moon-shot?

MM: So, I think that, I mean, I’m not an expert on Norway, but from my humble opinion, it’s that one of the bottle necks here is the inertia, so because there is so much money as you were mentioning, then there hasn’t been the kind of force for change. You know China today is spending 1,7 trillion on greening their economy, because they have the urgent problem of pollution, or other countries will have other types of, if you want, very urgent missions, and when you have so much money coming from the ground, from petrol, and which is basically driving the wealth of you know the pension-funds etcetera, there hasn’t been that urgent need for change and if you don’t have that, then you also don’t think through your structures enough. So, even though you don’t have an extreme right, or an extreme left, you know running your politics, inertia is just as much an enemy in some ways, of these extremisms. And so, I think what is interesting is that you have in some ways, from what I gather, and correct me if I’m wrong. You have citizens actually calling for change. You know there is a movement in some ways, for example for having a more sustainable economy, less wet to petroleum, but you don’t necessarily have the ambition and the structures in place to make that happen, so even something like a sovereign wealth-fund that is investing in so much just on the existing status quote instead of the new generation, not just of energy, we should think of green as a transformation of the whole economy, it’s just not about renewable energy. The more you can think through how to gather this wealth that is being created and reinvesting on the new opportunities which will set the new stage and landscape for future wealth creation and innovation, the more interesting the conversation is.

SS: You know I think we are a little to short-termist in terms of returns of everything we do these days. You almost have to see balance within the current budget, you know, and if you look at just example of electric vehicles and this country, I think we have the highest per capita, we have by far the highest per capita.

MM: 30% of Teslas are sold here.

SS: Yeah, and you know, there are lots of state subsidies going into this, I think somebody told me that state subsidies that go into electrifying our transportation sector, or private cars, is almost as half as the sum spent on child-welfare.

MM: But that’s a subsidy.

SS: Yeah, but the way we are doing it, exactly, is you know we have created a market, but we haven’t really done anything to change our whole, to develop a new sector. You know, ok, so we are a great market for electric vehicles, then let’s be the best country in the world for the whole eco-system, for electrification or transportation.

MM: So, this is what’s very interesting, so, again looking at Tesla, the supply side they reviewed from the US government, the demand side from the Norwegian government, which is really interesting, and the real question is: how do you link the two? How can we for example think about the way we structured demand, the way we structure even public services that become fundal for innovation to actually occur, you don’t just redistribute it. And there is very little thinking about that, and yet that is how if you look at again, you know coming back to the moon shot, that was actually something that government wanted to do, and add a demand side as well, but also fuel that supply side kind of investment, and how we can think of the modern welfare state, the 21st century welfare state, not as a dinosaur, not as an old fashioned institution, but we could literally rethink the tentacles of the state, which is in some ways the demand side, because you produce services that people require as a fundal through which innovation happens, there is so little thinking about this. Health to be honest I think is one of the obvious areas to look at that, because you have you know investments that are required and researched, not just about drugs, but also you know healthy living, diagnostics, surgical equipment, but then you have health systems and hospitals where health care happens, and currently there is a completely separate dialog, completely separate organizations, very different types of individuals that live in these two worlds. I think some of the most interesting future conversations will be where these two worlds meet.

SS: And maybe where we don’t just become a health sector that outsources all the innovation to you know companies on the other side of the world, but actually use some of that data-creativity.

MM: And this by the way, just one experiment I’d like to mention is what’s happening in Barcelona, in Spain, the mayor Ada Colau has really thought through some of these issues, so she thinks: you know why do we just worry about data after the facts, so we worry about how the tax google or the privacy issues, why not rethink, literally, how the data is generated, every time you click on the city map or uber, data is generated and currently the data goes into companies and then we worry about the problems afterwards, and the city of Barcelona is asking, how could we make sure that this data that is generated by this city, by citizens, moving about, and clicking on you know, the uber and city map or how that data can come back to the city to improve public transport? and those kinds of questions is how you do it, it is obviously not easy, they have a whole stream of hackers coming into the city, working with the mayor on this. It’s just a very dynamic question, and it’s much more pro-active, less worrying about problems just after they happen, and this by the way is what I call market co-creation, market shaping, not just market fixing, and that requires a whole framework.

SS: And this is where the entrepreneurial state can be entrepreneurial?

MM: Yeah, alongside entrepreneurial companies, this is how you build an entrepreneurial system.

SS: Very inspiring. Marianna, if people would like to read more about this kind of stuff, where should they go?

MM: Well, obviously to my two books: entrepreneurial state and value of everything, but also the work I’ve written on Missions for the European commission, which was just voted on by the European parliament, so the concept of Missions is now part of the horizon 100 billion framework program. I worked very close on that with Carlo Smoedas, it’s free on the web, you just type in “mazzucato missions European commission”. I think this is the future, how we can use public money, which is also transnational money, but also member state money, to drive through problem-based innovation. We can only do it together, and we also need the organizational capacity in both business and the public sector and thinking through those issues as what’s much more difficult.

SS: Marianna Mazzucato, thank you so much for coming here to Norway on a semi-regular basis, we give you a cold every time, you give us a lot of inspiration and we appreciate that very much.

MM: Thank you very much!

SS: Thank you for listening.

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Mariana Mazzucato (born June 16, 1968) is an economist with dual Italian and United States citizenship. She is a professor in the Economics of Innovation and Public Value and the director of the Institute for Innovation and Public Purpose (IIPP) at University College London (UCL). She is also a member of the Scottish Government's Council of Economic Advisers. Mazzucato is the author of The Entrepreneurial State: debunking public vs. private sector myths and The Value of Everything: making and taking in the global economy. In 2016, Mazzucato co-edited a book, Rethinking Capitalism: Economics and Policy for Sustainable and Inclusive Growth with Michael Jacobs. In 2013 The New Republic called her one of the three most important thinkers about innovation.

Mazzucato's research focuses on the relationship between financial markets, innovation and economic growth - at the company, industry and national level. She works within the Schumpeterian framework of evolutionary economics, studying the origin and evolution of persistent differences between firms and how these differences vary across sectors and over the industry life-cycle. Her empirical studies have focused on the automobile, PC, biotech and pharma industries.

In 2013 Mazzucato published The Entrepreneurial State: debunking public vs. private sector myths (Anthem). The ideas in the book were first set out in a shorter pamphlet for the think tank Demos, called The Entrepreneurial State. The 2013 book argues that the idea of the State as a static bureaucratic organisation only needed to ‘fix’ market failures, leaving dynamic entrepreneurship and innovation to the private sector, is wrong. She outlines a number of case studies across different sectors, including biotech, pharmaceuticals and clean technology, to show that the high-risk investments are being made by the state before the private sector gets involved. In a chapter examining the iPhone, she outlines how the technologies that make it ‘smart’ – the internet, GPS, its touchscreen display and the voice-activated Siri – were all Government funded. Two chapters in the book are dedicated to the emerging ‘green technology’ revolution. She details the public funds that she argues are laying the groundwork for this revolution in a similar way that the state invested in the most high-risk areas of biotech and nanotech. The book concludes with the author's contention that in all these examples, the risks were socialized while the rewards were privatized, and considers different ways to change this dynamic to produce more ‘inclusive growth’.

Marianna Mazzucatto
Professor in the economics of innovation and public values
CASE ID: C0353
DATE : 190326
DURATION : 38 min
Data - driven economyInvestment Innovation
"What you require to get really interesting innovation, is different types of public and private organizations who are willing to take risks, and who are willing to invest in their own capacity instead of just outsourcing the knowledge. In order to do that you need to pay attention to, not just money and finance, but to the organization."
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