Innovation and the Global Economy

Wednesday, June 23, 2010
Shanghai Jiao Tong University

President Zhang, thank you for your gracious introduction and for welcoming us to the campus of Shanghai Jiao Tong University. I want to particularly acknowledge Madame Ma, Chairperson of the Shanghai Jiao Tong University Council, whom we were deeply honored to host at our campus in Cambridge just nine days ago. We look forward to a future of productive collaborations.

As student and faculty leaders at one of the most distinguished universities in one of the most dynamic societies in the world, those of you here today are in many ways writing the story of the future, and it's a privilege to talk with you.

Since our MIT delegation arrived in China, we have been overwhelmed by the warmth of the welcome offered to us. It is the kind of greeting that one would expect from an old friend, and, of course, MIT and the Chinese people are old friends. The first cadre of Chinese students enrolled at MIT 134 years ago, in 1876, to study mathematics, mining, chemistry and mechanical engineering. In the years since, many of our Chinese graduates have achieved illustrious careers, both in China and the United States, from Yuk Wing Lee, who in the 1930s did groundbreaking research with Norbert Weiner, the founder of cybernetics, to MIT Ph.D Qian Xuesen, who became the youngest full professor in MIT history at that time, co-founded NASA's Jet Propulsion Laboratory in the United States – and was the father of China's space program.

China and MIT: A powerful web of connections
Over the decades, the people of China and MIT have woven a powerful web of two-way connections. Some connections have been institutional. We have wonderful examples right here at Shanghai Jiao Tong University, where collaborations with MIT include the China Leaders for Manufacturing Program, which graduated its first students last month. My visit here includes the celebration of a new and very exciting joint project, the Shanghai Jiao Tong-MIT Partnership. This new multi-year Executive Education partnership will bring groups of government, business and academic leaders to MIT to gain an in-depth understanding of the energy and environment challenges the world now faces and of strategies to develop and implement energy technologies for a cleaner, more sustainable future.

Faculty connections
One important connection stems from the 33 Chinese-born scholars who are members of the MIT faculty, including distinguished faculty leaders like Victor Zue, who heads MIT's Computer Science and Artificial Intelligence Lab, our largest research center; Li-Huei Tsai, the director of MIT's Picower Center for Learning and Memory, a pioneering brain research program; and Yung Ho Chang, who has served as department head of our Department of Architecture. Professor Chang founded China's first independent architecture firm and designed the Shanghai Corporate Pavilion at the current Shanghai Expo. More than 60 members of our faculty have already made China integral to their research, from urban planning to economics to energy, from cloud computing to cognitive science, and such connections and collaborations are bound to grow deeper and richer. We enthusiastically support the U.S.-China People-to-People Exchange, as laid out by State Councilor Madame Liu Yandong and U.S. Secretary of State Hilary Clinton in May.

Student connections
Students also represent a powerful connective force. Over the years, MIT has welcomed to our campus thousands of Chinese undergraduate and graduate students: 5,000 of them in the last two decades. In this past year alone, among MIT's 10,000 students, almost 500 came to us from China, with the highest enrollments in our graduate programs Electrical Engineering and Computer Science, Management, and Mechanical Engineering. The preparation, dedication and sheer brilliance of our students from China continue to place them among the very best at MIT. Just four years ago, we passed an important milestone when Martin Tang of Hong Kong, a graduate of MIT's Sloan School of Management, became the first president of MIT's Alumni Association to serve from outside the United States. Martin is a third-generation MIT graduate; he and his family have a 90-year history with MIT.

MIT also reaches another population of learners, a group who may never visit our Cambridge campus. These are the many students from across China who travel to MIT on the Internet, through MIT's OpenCourseWare initiative. OpenCourseWare makes available the materials for more than 1,900 MIT courses – almost every class we teach – online, to anyone in the world, free of charge. The OpenCourseWare website and its translation sites receive about 1.5 million visits a month, and 21 percent of those visits originate in China. This is, indeed, a nation of eager students.

More and more, the exchange of people and ideas flows both ways. I am delighted that we send growing numbers of MIT undergraduate and graduate students to work and study at Chinese businesses and universities. We intend to increase that flow in the future, and I must tell you: for our students, the effect of their experiences in China is profound. Let me quote one young man, Peter Jeziorek, a recent masters graduate in mechanical engineering. Through MIT programs, he spent two summers working in China, the first teaching computer science at Qinghai University in Qinghai province, and the second at an internship at Tsinghua University in a materials science lab. As Peter puts it, "These experiences have helped define who I am today and the direction of my career. Today I manage the development of products entirely designed and manufactured in China." His words express the transformative power of his own experience, but they also highlight much larger waves of change that are reshaping the bonds between MIT, and people and entities throughout Chinese society. This is the theme I want to explore today.

Addressing global challenges through collaboration
We come together at a fascinating moment, both in world history and in the relationship between MIT and its partners and potential partners across China. MIT's mission has always driven us to advance knowledge and educate students in service to the world, and today, many of the most important intellectual problems address humanity's most pressing, shared challenges. These are challenges on a global scale with global consequences, from energy to water, from poverty to pandemic disease, from megacities to climate change.

At the same time, the lingering weakness of the global economy also demands that MIT share its distinctive expertise in cultivating entrepreneurship and accelerating innovation. Our growing partnerships with entities across China serve to powerfully amplify MIT's mission, to address humanity's great challenges and to help restore sustainable, innovation-based economic growth, in at least three ways. First, China offers a unique perspective into some of the world's most intriguing technical problems, problems whose scale both demands innovative responses and provides new scope for experimentation. To name only two challenges that face China with unusual immediacy and scale: how to guide the development of sustainable megacities; and how to integrate highly diversified and distributed energy generation. For MIT to participate in innovating solutions to problems like these, we must engage with partners here. Second, China will continue to be the source of some of the most inspired solutions, as we have already seen with advances in ultra-high voltage power grid transmission and in high strength, lightweight aluminum skyscrapers. In fields from energy to public health to electronic communication, new-to-the-world technologies and new-to-the-world solutions will likely be rolled out first in China before anywhere else. Third and finally, China will increasingly be a fount of superb collaborators and colleagues. According to America's National Science Foundation, the number of doctoral degrees awarded in China in science and engineering rose from roughly 2,000 in 1993 to almost 22,000 by 2006; if this trend continues, China will soon outpace the United States in comparable doctorates. What's more, from 1995 to 2007, the number of science papers in English from China grew at an average annual rate of 16.5%.

Ultimately, for MIT to fulfill its own mission, we must work closely with counterparts in China. Finding solutions to today's global problems must, by definition, involve finding solutions to challenges as they are manifest in China. In that context, we have great hopes that China will be home to some of MIT's most important global partners. For Chinese society, as for all of us, tackling today's great global problems and the interlocking challenges of sustainable development is far more than an intellectual exercise; it represents a central task for China's future.

China: Seeking sustainable development, cultivating entrepreneurship
Related to that task is China's move from an economy largely dependent on low-cost labor to one fueled by entrepreneurship and innovation. Entrepreneurship is most certainly not a new force in China; to call out only one current high-profile example, witness the extraordinary success of Charles Zhang of Sohu.com, an entrepreneur who earned his Ph.D. in physics from MIT in 1993. Recent years have shown a broad, accelerating trend in the growth of an entrepreneurial mind set that promises to transform China's business landscape. For instance, last fall when Kai-Fu Lee started "Innovation Works" as an incubator and mentoring service for start-up companies, the firm was immediately flooded with résumés; already they have assembled a database of 100,000 engineers eager to launch or join start-ups in China. Another MIT student we sent to China witnessed this accelerating trend: After her first visit, she reported, "When I asked computer science undergraduates in Beijing about what they wanted to do, the most popular answer was to work for Microsoft." But when she returned through an MIT program two years later, she described "listening to some of the bright-eyed and energetic students in our Tsinghua class talk about their grand goals: of eventually founding the next Microsofts of China."

A shared interest in accelerating innovation
MIT shares China's interest in achieving sustainable development through entrepreneurship and innovation. So how can we best advance this shared goal? I believe we can and must work to accelerate innovation through partnerships, especially in key areas like sustainable energy. Through our shared aspirations and sustained, in-depth involvement, we hope to achieve synergistic benefits with our partners. Our longstanding partnerships, like the China-MIT Management Education Project, and the new partnerships we're announcing this week, like the SJTU-MIT Executive Education Program, reflect MIT's interest in and commitment to engaging further with colleagues in China in sustained and meaningful ways.

I am often asked how to accelerate innovation. One strategy is to try to understand and amplify some of the mechanisms that promote it, so let me describe some characteristics and programs at MIT that foster innovation. At MIT, like most universities, our mission includes the production and transmission of new knowledge. However, we also understand our mission to include the development of innovators and innovations. According to a recent study, MIT graduates alive today have founded about 25,800 currently active companies, which employ about 3.3 million people worldwide and generate annual world sales of $2 trillion. Whether in manufacturing, biotech, software or consulting, many of these firms have built their value on new science, technology and engineering, some of it developed at MIT.

Not all universities have such a strong culture of innovation and entrepreneurship, but MIT was founded in 1861 for the specific purpose of helping to accelerate the industrialization of America. We became one of the first American institutions to provide the kind of scientific and technical education that would prepare young people to invent and refine the breakthrough technologies of their day. Today, technology transfer is simply part of our core mission, and MIT and other American research universities have become a powerful force in US economic growth. In fact, most economists agree that in the half century after World War II, roughly half of all economic growth in the United States sprang from technological innovation, much of which had its roots in university-based research, from the microchip to Magnetic Resonance Imaging, from GPS to the World Wide Web.

Five principles for creating an innovation ecosystem
After almost 150 years of transferring technology from the mind to the marketplace, we've learned that accelerating innovation requires an "innovation ecosystem." Although I cannot possibly describe all of its elements in detail today, I will highlight five basic principles in the creation of a productive innovation ecosystem:

First, universities, faculty and students need the academic freedom to pursue their best ideas in science and technology. We expect members of the MIT faculty to pursue scholarly research and technology development at the very frontiers of knowledge. We rely on them to guide the development of disciplines and the discovery of new directions. For our faculty to effectively lead MIT into the future, we strive to appoint the very best and create conditions in which they and their students can do their very best work.

Second, because the world's most pressing problems are massively complex and interdisciplinary – like designing a sustainable energy system that will meet the rapidly increasing global energy demand – we must remove barriers and encourage collaborations across disciplines, across institutions and across national boundaries. The trend toward boundary-crossing work is truly global: In 1998, 26% of the scientific papers published in OECD countries involved international collaborations. By 2007, that number had jumped to 46%.

Third, universities and funding agencies need to emphasize fundamental research, and actively link research and teaching. In the search for real-world solutions, it may not seem obvious to focus on fundamental, discovery-based research. Almost all new, transformational technologies, however, can be traced back to basic research discoveries. As one example of this principle at work, consider some of the revolutionary energy storage technologies coming out of MIT: the novel lithium ion battery technology of A123 Systems, founded by MIT Professor Yet-Ming Chiang (and which has manufacturing collaborations in Shanghai); or Professor Angela Belcher's batteries that, incredibly, are self-assembled by benign viruses at room temperature and without toxic byproducts; or the liquid metal batteries invented by Professor Donald Sadoway that promise to store electricity efficiently on a very large, power-grid scale. All three of these remarkable new-tech energy storage devices sprang from basic, fundamental research. In addition, when faculty members weave their latest research into their teaching, it markedly enhances the educational experience for our students. We also encourage our students to work directly in faculty research laboratories; by the time they graduate, more than 85 percent of MIT undergraduates have worked side by side with our faculty on leading-edge research, learning lessons they could never master in a classroom.

Fourth, unfortunately, even the best new ideas or technologies cannot make it to the marketplace on their own. At MIT, we have built a culture of entrepreneurship, and we encourage technology transfer. To help successful inventors become successful entrepreneurs, we guide them through the complexities of intellectual property law, help them develop effective business plans, expose them to the local venture capital community and more. We also connect entrepreneurial faculty and students with mentors, including MIT graduates and others who have started their own companies, and in some cases even provide early-stage funding. Our Deshpande Center for Technological Innovation focuses on helping emerging technologies succeed in the marketplace. Over the last 10 years, our Venture Mentoring Service has advised more than 1,400 entrepreneurs involved in nearly 800 start up ideas; 130 have advanced to become real operating businesses, which collectively have raised more than $720 million in investments, grants and other support. Both faculty and experienced entrepreneurs have embraced the kind of boundary crossing that has made these programs so productive.

Fifth and finally, academic institutions can collaborate with industry and still preserve the open interactions essential to advanced scholarship. MIT is rare among American universities in our enthusiasm for working with industry. To maintain the open flow of people and ideas that fosters the highest quality education and basic research, we have put in place practices and policies that govern our industry-sponsored research, to preserve academic openness while still permitting us the benefits of engaging with industry. These benefits include gaining a window into important new research problems, having an impetus to accelerate the transfer of interesting ideas into useful products, and opening exciting opportunities for our students to practice hands-on, real-world problem solving, itself a vital tool in preparing them for entrepreneurial careers. The industry partners in the MIT Energy Initiative, for example, have helped advance many important projects toward real-world implementation, including launching of new solar conversion and new energy storage technologies into the marketplace.

Promoting innovation through partnerships
These principles – the academic freedom to pursue the best ideas in science and technology; the value of wide-ranging collaborations; the importance of basic research, directly linked to teaching; the need to actively guide aspiring entrepreneurs; and the benefits of engaging with industry – define many of the most important factors in creating a healthy innovation ecosystem. We are enormously encouraged to find these ideas vibrantly manifest in our partnerships here in China. For example: the Low Carbon Energy University Alliance awards its seed funds competitively to research teams that include faculty from Tsinghua and from Cambridge University or MIT. Our China Lab program unites IMBA students from Tsinghua and other top Chinese universities with students at MIT Sloan; together, they work in teams to solve real-world business problems for Chinese entrepreneurs. And in terms of collaborations with industry, few MIT-industry partnerships have been as ambitious or productive as our longstanding connection with the industry-funded EPOCH Foundation of Taiwan.

Building on this firm footing, MIT and China's institutions and people are poised to begin a new era of productive partnership. With a bond based on mutual respect and appreciation, a shared reverence for scholarship and a willingness to learn from each other, I believe we can make uniquely powerful contributions to solving the immense shared challenges of our time. At MIT, we value greatly our growing collaborations here in China, and we look forward to designing new ways to serve the world, together.