Greater Boston Chamber of Commerce

Wednesday, September 14, 2005

It is a pleasure to be here. I am grateful to Paul Guzzi for inviting me to join you this morning. And I’m glad to have this occasion to salute the Greater Boston Chamber of Commerce. The Chamber does very important work – not just on behalf of our local business community, but more broadly, on behalf of all of us in the Charles River basin. Our local economy is unique, and Paul and his colleagues have a clear understanding of the importance of productive interactions between business, government, universities, and other not-for-profits.

Strong collaborative relationships are more vital than ever in today’s current economic and political situation. Because if there’s one undeniable reality about the economy today, it’s that globalization is changing the way we do business. And we will need to change the way we think about our businesses and about our educational systems if the United States is to remain a major force in the global economy.

Thomas Friedman, in The World is Flat, offers a terrifyingly amusing vignette. When he – and you and I – were growing up, our mothers told us, “Finish your dinner. People in China and India are starving.” Now he tells his daughters, “Finish your homework. People in India and China are starving for your job.”

Globalization obviously presents us with some new challenges. We are right to consider, for example, whether the globalization of the workforce in science and engineering threatens U.S. economic leadership. Richard Freeman, in a recent working paper issued by the National Bureau of Economic Research, has suggested that in the long run the U.S. will have a less dominant position in science and engineering. He cautions that, to remain a competitive force, we will need to develop new labor market and research and development policies that build on existing strengths, and new ways of benefiting from scientific and technological advances that originate elsewhere.

But the good news is that, today, ideas and products generated in Massachusetts have the potential to improve health and the quality of life around the world more than they ever have before. To realize that promise, however, we’ll have to work together – and universities, other not-for-profits, business, and government all have a role to play.

The Role of MIT
Universities play a critical role in catalyzing the technological innovations that fuels economic growth. Robert Solow, one of MIT’s Nobel Prize winners in economics, estimated that more than 50 percent of America’s economic growth since World War II has derived directly from technological innovation.

MIT has played a unique role in this process. Our faculty and researchers have pioneered the development of countless new technologies, and we educate students in entrepreneurship, innovation, and leadership. As a result, our graduates, faculty, and students have had a tremendous economic impact – founding literally thousands of companies employing, at last count, well over 1 million people. This process continually renews itself. Over the course of last year, 133 new US patents were issued to MIT, and our Technology Licensing Office completed 102 new technology licenses and 20 option agreements.

While MIT is a national and an international institution, our economic impact is particularly important in this region. Some of this is direct: We are, in one sense, a successful “export” industry, attracting students and research funding from across the country and around the world. But what is more profoundly important, is the impetus we give to regional innovation. Last year, 38 percent of our technology licenses went to Massachusetts companies. The state represented a much higher percentage – 78 percent – of our exclusive licenses, where companies typically expect to make a substantial investment in commercialization. And 90 percent of the startup companies to whom we license are based in the Commonwealth.

In recent decades, the economic impact of university research has been easiest to see in areas such as information technology, telecommunications, and the life sciences. But I think there are other, equally exciting prospects on the horizon. Think about energy, for example – a topic that’s been on all our minds recently. Last spring, at MIT we launched a new initiative to focus and intensify work on energy across our campus. This is an area with tremendous opportunities. I am hopeful that MIT research will spark the next generation of new energy technologies – even though Cambridge is far from the Oil Patch.

The Conditions for National Success
As we think about today’s competitive pressures, it’s clear that they are operating at more than one level. Before talking about some of the issues specific to our region, I’ll mention briefly three key national challenges – problems that endanger economic competitiveness for the whole country. If you have heard me speak before, please bear with me. These three issues remain crucial to our future, and are not going away any time soon.

First: Public education – and, to be unabashedly specific, mathematic and scientific literacy. In the year 2000, only 18 percent of American 12 th-graders were working solidly at grade level in science, and only 16 percent in math. That, to my mind, is a national crisis.

Now, I hasten to reassure you that MIT still attracts truly exceptional students, and about 85 percent of our seniors graduate with degrees in science and engineering. But we are far from typical. Across the United States, only about 17 percent of bachelors’ degrees are awarded in science and engineering. In Singapore, that figure is 68 percent.

To keep the pipeline of the innovation economy flowing, American children need first-rate teaching in math and science. And they need to get the message that these fields are valued and fun. In my dream world, a math Olympiad would generate as much enthusiasm as a football game!

Second: We have to maintain public investment in research and higher education. In the post World War II decades, national and state investments created new knowledge, a more educated workforce, and new technologies and products. But we have not followed through on that very effective investment strategy. Over the last four decades, the federal investment in research and development, as a percentage of GDP, has declined by over half – from almost 2 percent of GDP in the mid-1960s to about three-quarters of 1 percent today. At the same time, it is becoming more difficult for students from lower and middle income groups to go to college.

The generation of new knowledge and the creation of an educated workforce are both essential to innovation and economic growth, and neither of them is possible without public investment. America’s system of higher education and research has been an engine of economic growth and individual opportunity. This week’s issue of the Economist, in a special section on universities, points out that higher education is one field where the United States retains an unrivaled competitive position. Maintaining this position of world leadership requires continual refueling through wise investments.

Third, and finally, we need to keep American education open. We must keep higher education accessible to the best and brightest young people in America, because it will take the talents of our whole population to sustain the innovation economy. And we also need to continue to attract the best and brightest from around the world.

Our universities and our industries have benefited enormously from the talents and skills of immigrants. Let me give you just one example from MIT: Of the 20 department heads and lab directors in our School of Engineering – widely regarded as the finest in America and the world – three-quarters of our top Engineering leaders were born outside the United States.

Unfortunately, international students and scholars now find it more difficult to enter the United States. According to the Council of Graduate Schools, the number of students from overseas applying to American graduate schools dropped more than 30 percent over the last two years. (Here again, MIT is fortunate to be an exception to the general trends. Our graduate applications from international students have held steady over the same period.) MIT strongly supports appropriate measures to ensure our national security, but we must make sure that they are no more burdensome than they need to be. Our nation cannot afford to lose excellent students, especially in science and engineering.

If we are to address successfully these three challenges – K-12 education, public investment, and openness – we will have to bring together universities, the private sector, and government. If we can do that, we will be laying the groundwork for a new era of national innovation and economic growth.

The Conditions for Regional Success
Now, what about the regional level?

The Massachusetts Technology Collaborative, in its annual Index of the state’s Innovation Economy, ranks our performance against that of six other “Leading Technology States” in the country. The good news is that we are in that select group of peers. The bad news is that every one of them – from California and Colorado to New York and Connecticut – wants to eat our lunch. (Or, Thomas Friedman might say, our dinner!)

And we have some specific local challenges to address if we are to compete successfully. Here, I’d like to acknowledge how much my own thinking draws on the excellent work the Chamber has done, especially in its fine recent report on sustaining greater Boston’s life science leadership.

One of the crucial challenges, obviously, is housing. The high cost of housing in the region deters talented students from staying here once they complete college or graduate school; it makes it difficult for mid-career families to live within an acceptable commuting distance of job opportunities; and it can make it almost impossible to recruit senior professionals from other areas of the country. I’m sure all of you read last week about the release of the third annual “Housing Report Card,” produced by the Boston Foundation and the Citizens’ Housing and Planning Association. I hardly need to recite its conclusions. Housing prices in this area are rising much faster than wages. And most homeowners in the region could not afford to purchase their current homes if they had to pay today’s prices. Is it any wonder that Massachusetts was the only state to lose population last year?

We face the effects of this situation every day at MIT, and I’m sure you face it in your own businesses and organizations.

A second issue that comes up repeatedly when I talk to colleagues is that it can simply be very difficult to get things done around here. The Chamber has pointed in particular to the importance of streamlining the permitting process. I think the issues go beyond specific laws and regulations. And it is not just about government. In fact, many of our leading public officials have a keen understanding of the need to improve the climate for innovation.

But culture and a shared commitment are vitally important in fostering innovation. Other states and local regions are working more aggressively than we are to retain existing knowledge-based industries, and to build new ones. They are investing more in education and research. They are making it easier for new businesses to get off the ground, and for employers to expand their operations. (And, of course, if this is true in this country, it is even truer overseas, where governments such as Singapore’s make economic development a prime driver of national policy.)

Just as it will take collaboration at the national level to tackle problems such as K-12 education, we need a collective commitment to address such crucial regional issues as housing, and permitting. Those of us in business, universities, medicine, and other nonprofits all have to do our part to educate our public officials and the electorate about what is at stake for everyone.

Unique Local Assets
So, we in the Boston area do have some hard work ahead of us at if we are to remain a national and global leader in our era’s most exciting knowledge-based industries. But we start from a strong position.

First, we have a remarkably educated workforce. Now, it’s true, as the Chamber has rightly pointed out, that we can do a better job training young people for careers as technical workers. And Jim Mongan and his colleagues are understandably worried about the impact of a shortage of nurses on their organizations. Still, the percentage of the Massachusetts population with a bachelor’s degree is the highest among key competing states, and at more than 37 percent is a full ten percentage points ahead of the nation as a whole. The most recent figures I’ve seen show that the state also leads the nation in the number of scientists and engineers as a share of its total labor force.

And we have a truly unique constellation of knowledge-generating institutions – our great research universities and academic medical centers. These are not just factories for ideas and potential patents. They are also magnets for creative businesses. One important reason why our life sciences sector has grown is because established national and global leaders want to tap into a skilled workforce and into the ideas generated in our laboratories. The result is a virtuous circle of intensifying activity. That’s why we now have some 150 biotech, pharmaceutical, and medical-device companies within walking distance of the MIT campus.

In addition, The Charles River Basin is, housing costs aside, a great place to live. Even in today’s increasingly digitized economy, location matters. And we have tremendous assets there. Wonderful scenery and outdoor opportunities. A rich artistic and cultural life. The Patriots. The Red Sox!

Most important, though, we have the kind of population that is attractive to other bright, energetic, entrepreneurial people. This is due in no small part to our universities, which attract so many of the best and brightest young people from our own country and abroad.

But we cannot rest on our laurels. Mark Trusheim of the Massachusetts Biotechnology Collaborative has made that point vividly – reminding us that Henry Ford moved from Memorial Drive to Detroit, that shoes and textiles moved South, then overseas, that President Johnson moved the NASA Space Center from Kendall Square to Houston, that California and Texas won in minicomputers and workstations. Only time will tell how offshore operations will affect our IT and telecomm sectors. And the same recent Milken Institute study that named us the top life sciences cluster pointed out that others are coming up fast.

At MIT, we will do our part to make sure that this region remains a leader in innovation. One of our responsibilities is to keep education at MIT relevant to changing intellectual, technological, and business conditions. That’s why we continue to develop new academic programs in fields such as biological engineering, computational and systems biology, and biomedical enterprise, and why we’ve established the new Center for Biomedical Innovation, which will develop ways to move advances in the life sciences from the laboratory to patient care more efficiently and safely.

Collaboration – A Vision for the Future
But no single institution – not even MIT! – can make the difference for greater Boston. Collaboration across intellectual and institutional boundaries will be a condition for success in the next phase of the innovation economy. Science and engineering themselves are showing us the way. The most exciting new areas of teaching and research draw together specialists from multiple disciplines. In pooling their expertise, they create entirely new fields.

As you all know, we are in the midst of an exciting convergence of engineering and the life sciences. This convergence holds the promise of transforming our lives, but it is not unprecedented. In fact, at MIT, we know the precedent very well. Seventy years ago, President Karl Compton insisted that the physical sciences must play a critical role in education and research at MIT. The result was nothing less than a new era in engineering, which spawned the IT and communications industries. Today, engineering is making the same kind of fertile connections with the life sciences, and I believe we can expect equally revolutionary results.

At MIT, we are combining our historic strength in engineering and our newer strengths in biology and the brain and cognitive sciences. Geographically and intellectually, we are bringing together our computer scientists and life scientists, our linguists, philosophers, and engineers. And together with the work of colleagues at the Broad and Whitehead Institutes, we cam already see a torrent of new collaborations, insights, and results emerging from the labs at the intersection of Vassar and Main Streets in Kendall Square.

And this leads me to my next point: That collaborations across institutional boundaries are essential to the innovation economy.

I have been impressed by the volume of collaborative activity between MIT and other area universities, such as the exceptional joint program in Health Sciences and Technology established by MIT and Harvard 35 years ago. Structuring collaboration across departments within one school is a non-trivial task; building collaborations across institutions poses even greater challenges. But MIT will actively foster these collaborations because many of the most important opportunities before us require skills and resources that no single institution can deliver.

The Broad Institute, whose mission is to fulfill the promise of the Human Genome Project for new advances in medicine, is a perfect example. No single institution could have commanded the necessary expertise in molecular biology, genomics, chemistry and chemical biology, computational science, and engineering, together with the necessary breadth and depth in medicine. That is why MIT, Harvard and its affiliated hospitals, and the Whitehead Institute for Biomedical Research joined together in this effort. In its first year, the Broad has assembled a stunning team of scientists, physicians, and engineers who are already providing new insights into diseases and their cures.

I have drawn the circle of collaboration around departments and schools within MIT and then enlarged it to include our academic and medical colleagues. Of course, I must enlarge the circle further to include the critically important collaborations between the academy and industry.

Partnerships between universities and industry benefit both sides. And they benefit society by facilitating the transfer of knowledge from the lab to the marketplace. Forging productive links between universities and business was one of the founding principles of MIT, and this is more important than ever in today’s environment, when federal research support is so constrained, and when the opportunity for life-improving technologies is so great. As we look to the future, we all need to think creatively about how we can best work together to sustain the innovation economy by transferring the fruits of university research to society.

And finally: The role of government. I’ve already mentioned a few key public policy issues – some affecting universities in particular, others that touch us all. Experience shows that we can partner effectively. I was very impressed, for example, by the robust collaborative efforts that went into ensuring that Hanscom Air Force Base would continue to play a vital role for the state and the nation.

My own hope, is that the academy, industry, and our public officials can continue to work together to make this area the nation’s best environment in which to innovate – because I think that here in Massachusetts we have a unique opportunity to lead the nation and the world.

Since arriving in Cambridge, I have been struck by the area’s tremendous excitement and energy. New ideas emerge at an amazing rate in the labs at MIT, at other universities, at our great hospitals, and at companies large and small. Now, our shared challenge is to harness those ideas: To make them work for business, for the region, and for people worldwide.

That will take the efforts of all of us in this room, and of many others as well – people on Beacon Hill and in the Longwood medical area, in Harvard Square and at Boston City Hall. But I believe that we will succeed in this effort. Working together, we can build on nearly two centuries of technological innovation to strengthen America’s economy and businesses in an increasingly competitive world. I hope that this morning marks the beginning of many fruitful conversations and collaborations.