Paving the Way Back to Growth: Innovation and the Research University

Monday, March 22, 2010
Eurobank Dinner Remarks The Acropolis Museum

Living amid so many treasures of the past, one great gift from Greece to the world has been the ability to take the long view, to understand that there is more to the human story than the events of the present, however overwhelming they may seem. This is surely a moment of great economic difficulty and political turmoil for many nations of the world. We all share the pressing concerns of the present, and, perhaps like many of you, I do not pretend to have immediate, foolproof solutions to them. Tonight, then, I will talk not about the tangle of the present but instead about a path to the future and, specifically, about the role of innovation in restoring economic growth.

We all know that the global economic downturn has extracted a terrible human price. In the United States we have lost 8 million jobs since beginning of this “Great Recession.” In fact, we have fewer jobs today than we had in 2000, yet we have 11 million more workers. In the Eurozone, the numbers are equally staggering, with unemployment stubbornly hovering at 10% or more and at almost twice that rate for young people. Moreover, because this downturn is likely to be not simply a passing downswing in the business cycle, but a true structural recession, many of the jobs lost will not come back.

Given that context, where will we find the solutions to today’s stalled economy? How do we start building a future brighter than today? I believe the most promising source will be innovation, and tonight I want to argue for the powerful role that research universities can play in driving both innovation and economic growth.

For most of human history, universities were not predominantly in the business of generating new ideas; they were more concerned with conserving old ones. But since World War II that role has changed dramatically. Most economists agree that in the United States roughly half of all economic growth in the second half of the 20th century can be attributed to technology, and much of that technology has its roots in university-based research, from the microchip to Magnetic Resonance Imaging, from GPS to the World Wide Web.

At MIT, we see our major role as creating and disseminating new ideas, and that means producing both innovations and innovators. Our equal focus on innovators and on innovations is important, because to make a difference in the economy – to create new jobs and fundamental economic growth – people with new ideas need to start new companies. It has been reported that over the last 15 years, 64% of net new job growth in the United States has sprung from small and medium-sized firms, and those are largely new, growing companies.

It has become increasingly clear that once new technology-based firms take root and thrive, they can have an enormous impact. A recent study provided strong evidence for the global economic impact of new companies founded by MIT-educated entrepreneurs. The study, “Entrepreneurial Impact: The Role of MIT,” reported that, worldwide, MIT alumni alive today have founded 25,800 currently active companies. These companies together employ about 3.3 million people, and they generate annual world sales of $2 trillion, or roughly the equivalent of the 11th-largest economy in the world.

Today, for all of us, the question then becomes: how do we keep the engine of innovation running, and running faster? And how do we educate our students so they, themselves, are primed to innovate? In studying our own experiences at MIT, we have found that it takes an innovation “eco-system”: a large number of interlocking forces and conditions that allow innovation to thrive and help new ideas make it to the marketplace. Generalizing broadly, the success of such an ecosystem comes down to four factors: 1) Open competition for the best people and ideas; 2) the flexibility for the best people to pursue the best ideas; 3) a deep commitment to basic research; and 4) an enthusiasm for opening doors. You can find these factors in many places, inside and outside the research university, but tonight, I will use MIT examples to expand on each theme briefly.

First, competition. In the United States, since World War II all research universities have had to compete against their peers for research funding from the Federal government. I can’t say that we always enjoy it! And there are certainly those who object to the fact that by favoring merit over equity, this system tends to concentrate resources and talent in a few institutions. But I am convinced that peer-reviewed competitive funding is very good for all of us. We face similarly intense competition with peer institutions for top faculty and students, which leaves us with no choice but to drive ourselves constantly towards excellence. Needless to say, this competition for talent is increasingly global, an accelerating trend that will continue to raise the bar intellectually for everyone. At the same time, it will create an exceptional academic peer community around the world, which will inspire and drive some extremely interesting collaborations.

The second factor in a thriving “innovation ecosystem” is intellectual flexibility. Fortunately, the United States government gives America’s research organizations, whether public or private, considerable autonomy to set our research agenda; that permits us to follow the best ideas of our faculty wherever they lead. The government cannot fund every daring new idea, but neither does it stop us from pursuing them. This is an important strength not enjoyed in every nation around the world; many countries are now investing aggressively in new universities, but without true academic freedom, they may, unwittingly, constrain their own creativity.

At the same time, because America’s private universities have multiple sources of revenue – not only tuition and government grants, but also foundation funding, industry partnerships, donations from individuals, and income from our endowment – we have the flexibility to seize new intellectual opportunities. Let me offer one example: MIT’s OpenCourseWare initiative, or OCW. With the rise of the World Wide Web, 10 years ago the MIT faculty decided it was a moral imperative for us to make the materials for MIT courses available free, online. So we did, thanks not to government funds, but to funds from foundations and corporate partners. The OpenCourseWare website now includes material for more than 1,900 MIT courses and averages close to one million visits a month. Almost half of OCW users access the site from outside of the U.S., and almost half are not college or university faculty and students, but independent learners. So, competition and flexibility surely stimulate our creativity, as individuals and as an institution.

The third factor I want to describe may sound odd in a talk about innovation, but I’m convinced that much of our ability to deliver important, practical advances comes from a commitment to basic research. MIT is a $600 million research operation. A substantial fraction of those dollars supports research that is not explicitly focused on solving practical problems or responding to market needs. It is the kind of work I have done myself as a neuroscientist: pure, curiosity-driven exploration, conducted in an environment replete with advanced technology, thanks to long-term government support for fundamental research.

Not surprisingly, that environment itself has made MIT a hotbed of new insights and ideas that often lead to unexpected real-world results. Just one example: In a time when everyone is looking for new, clean, “green” answers to personal transportation, one of the most promising new lithium-ion batteries on the market sprang from an MIT lab – a lab doing basic research on the nature of materials, led by Professor Yet-Ming Chiang, the Kyocera Professor of Ceramics in the Department of Material Science and Engineering. Based on his research results, Professor Chiang founded a company, A123 Systems, that makes batteries for hand-tools, transportation and large-scale (that is, grid-scale) storage. It’s important to note that no matter what realm they work in, our basic researchers do not inhabit some separate community, walled off from more applications-focused researchers; they are part of the very fabric of the Institute. At MIT, an unusual degree of mutual respect flows between the theoreticians and practitioners, and many of our faculty work in both camps, so translational research and entrepreneurship come naturally.

The fourth and final element in a successful innovation ecosystem is what you could call an enthusiasm for opening doors. We have found that innovation flourishes when people and ideas can flow across, through and around every kind of traditional organization. For instance, it is common to think of teaching and research as separate or even competing activities. But at MIT, we insist that teaching and research go together. Almost all our faculty, even our many Nobel laureates, teach. At the same time, all MIT professors conduct advanced research, and they bring their enthusiasm, relevance and cutting-edge knowledge into the classroom.

You can imagine how powerful that is for students. And the advantages flow both ways: When MIT Professor Richard Schrock won the Nobel Prize in Chemistry, at the ensuing press conference he thanked his family, then his colleagues – and then the MIT students who had helped him sharpen his experiments and ideas. That kind of intellectual excitement creates an atmosphere in which our students, even our undergraduates, are passionately interested in doing original laboratory research. In fact, by the time they graduate, 85 percent of our undergraduates have engaged in frontline, hands-on research with our faculty, through our Undergraduate Research Opportunities Program, or UROP. I can’t overstate the value of that experience: in effect, even before they leave college, they stop being intellectual spectators and start seeing themselves as doers, makers and creators of new knowledge.

Finally, I believe that accelerating innovation requires an aggressive commitment to opening doors between traditional disciplines, between academic institutions, between the academy and industry, and to countries around the world. At MIT, many of our students and faculty confidently cross between departments and schools as easily as they cross the street. We foster this cross-traffic by breaking down bureaucratic barriers between disciplines, because we believe that it fosters the invention of remarkable new solutions.

Opening the doors between institutions can be harder, but when we have succeeded, great results have followed. MIT, Harvard and Boston’s extraordinary academic medical centers have collaborated productively for many decades. Recently, we have amplified these connections, through the Athinoula A. Martinos Imaging Center, the Broad Institute for Genomic Medicine and the Ragon Institute, and exciting progress has poured forth: insights into the mechanisms of brain diseases, more rapid identification of genes for disorders like autism and diabetes; and new strategies for HIV-AIDS vaccines.

I want to focus a little more deeply on one kind of openness that is particularly vital to university-based innovation, the kind of innovation that leads to new companies and new industries: opening doors between the academy and industry, which remains unfamiliar territory for many universities, even in the United States. Let me give you some history.

In the early days of our country, American universities were founded to train ministers or to provide a classical education for the sons of the very rich. By contrast, MIT was a latecomer, founded in 1861 for the express purpose of helping to accelerate the industrialization of America – to provide the kind of scientific and technical education that would prepare young people to invent and develop the breakthrough technologies of their day. So, in a very real sense, MIT was born with technology transfer in our DNA.

Today, while we maintain a true reverence for scholarship across the entire academic spectrum – from pure mathematics and theoretical physics to more applied fields like architecture and management – we have many programs expressly designed to help translate great ideas from the mind to the marketplace. I’ll describe only two of a very large array of programs.

Our Industrial Liaison Program each year connects close to 200 member companies with MIT faculty and students doing relevant research. This is reflected in the 14% of MIT’s research funding that comes from industry. The MIT Energy Initiative, for example, which is developing the technologies and polices to change the world’s energy systems, is almost entirely funded by industry partners. Industry partnerships bring us important intellectual problems, they help speed new technologies to market, and they help focus our work for lasting, practical impact. Even so, industry sponsors will not fund early research or support faculty, and for those critical elements, we must rely on private philanthropy. At the same time, to accelerate the process of technology transfer, we have developed a very active and effective Technology Licensing Office. This past year – typical of most years – MIT received over 150 new United States patents and many international counterparts, and MIT intellectual property spawned 21 new companies.

The last element in our innovation formula requires opening doors to international partners. To stay at the forefront of tomorrow’s innovation frontier, today’s research universities absolutely must open their doors to international collaborations. Let me give just a few examples of MIT’s many projects around the world. MIT has collaborated with Singapore for over a decade, and this year we are participating in the design and launch of a new kind of research university, built on the integration of technology and design in the educational curriculum and in research. In China, we are helping to invent a low-carbon energy future together with Tsinghua University and Cambridge University. And through the MIT Sloan School of Management, students in our “Global Entrepreneurship Lab,” known as G-Lab, work with companies in emerging economies around the world on mini-consulting projects, with tremendous benefits for students and companies alike.

At the risk of having talked too much about the American innovation system, I hope I have succeeded in giving you a picture of how research universities can be a crucial catalyst for innovation and for a return to economic growth. We play a catalytic role in the many ways that I have laid out, by sending innovators and innovations into the marketplace. Obviously, however, the American experience represents only one example of humanity’s tremendous capacity for creativity and change; it has never been more evident that the future of invention and innovation will be told in many different languages.

Increasingly, around the world, nations striving to build knowledge-based, or innovation-based, economies are investing in the development and innovative capacity of their people. They are aggressively building universities and research centers to tackle the world’s great challenges. And although some view these advances as an uncomfortable new source of competition, I could not be more enthusiastic about its potential to spur innovation and growth, to the benefit of all of us.

So let me close on this note: For as long as we in the West have had universities, at least since the founding of the University of Bologna in 1088, a defining aspect of academic life has been that the same ideas are pursued simultaneously around the globe, often with one language and one literature. That’s especially true in science and engineering. In a world too often fractured by conflict, this tradition of the global intellectual commons represents a powerful convening force for humankind and a potent force for unified global action. If we nurture the global intellectual commons – by sharing our knowledge and by reaching out to work with friends and collaborators around the world – and if we train our students to appreciate the value of this remarkable tradition, we will go a long way towards inventing a better future for us all.

As someone with great faith in the human capacity to rise to a challenge, I look forward to a future of ever-expanding collaborations, with individuals, institutions and nations who have set their sights on inventing the future.