[MUSIC PLAYING] (SINGING) When you walk in the room do you have sway.
I’m Kara Swisher and you’re listening to “Sway“. If you want to know who the pope, Bill Gates, and AOC are turning to these days for advice on how to reimagine a more equitable capitalist society, it’s economist Mariana Mazzucato. Since her first book, “The Entrepreneurial State“, Mazzucato has argued that we’re thinking about capitalism all wrong. She says governments should lead innovation and act more like venture capitalists instead of leaving it up to the private sector. Why take a backseat to Silicon Valley and tech billionaires? That’s a great question. Mazzucato has been called one of the most influential economists in the world, and one of the scariest. I say she’s on to something. In her latest book, “Mission Economy“, Mazzucato looks to the 1960s. ^ARCHIVED RECORDING (JOHN F KENNEDY)^ We choose to go to the moon in this decade and do the other things, not because they are easy, but because they are hard. JFK’s Apollo moon shot missions sparked a frenzy of innovation. Nothing quite like it has been attempted since. Can that kind of ambitious publicly funded effort solve today’s biggest problems — polluted oceans, poverty, maternal mortality, cancer? Do we need a Manhattan Project for climate change, and where would we even start?
Welcome to “Sway“, Mariana, thank you for coming on.
Thank you for inviting me.
So you’re on a mission to save capitalism. It sounds like a moon shot mission. Let’s talk about what’s wrong with it at this moment from your perspective.
Well, so there’s lots of things wrong with it, but it’s not a coincidence. We actually have framed the way we think about capitalism in a problematic way, and that’s actually then filtered down to how we govern our public institutions, and also corporate governance. So the first thing is we often think of the market as this thing that’s sort of external to say business, and business gets forced into doing things. Which then might be problematic because of market pressures. That’s already the first thing that’s wrong. Markets are actually outcomes. Markets are outcomes of how we decide to structure our businesses, our government institutions, and I think there’s problems in both of those. We have a business sector, which is often too short-termist. So just in the last 10 years the S&P 500 companies have spent over $4 trillion just on buying back their shares to boost stock prices. That’s a problem. That’s a lack of reinvestment. And government is also problematically structured, often kind of too little too late. And that’s because at best we think of the role of policy as fixing markets — fixing market failures. So by definition, you almost have to wait for a problem to arise before you can justify any sort of policy. But one of the big things, I think, that’s also wrong is how public and private relate to one another. If you use the word partnership or ecosystem, which is the trendy way to talk about public private partnerships, and you use that word with a biologist they’ll actually stop you and say, excuse me, do you mean a predator prey ecosystem? A parasitic one, a symbiotic, a mutualistic? And I think we have often predatory parasitic public private partnerships.
Who’s the predator in that regard?
Well, you know, interestingly it sometimes changes. But in general by parasitic I mean that you might have one doing one thing, so government funding a massive amount of infrastructure or everything in our iPhones, our smartphones, was publicly financed — internet, GPS, touchscreen, Siri. And then the private sector benefiting from that —
Yeah, and sucking up all the information. They often do that with their customers, too. The trade that is made between tech customers, for example — I’ll use that because it’s something I know about. What they give us, free maps, dating service, whatever it happens to be, we hand over all the data, we hand over all the value. And they extract it and use it for themselves, and then hand it back to us, but not as value.
And there’s nothing inevitable in that. There is decisions made that lead to that. I mean, the broader way I might define a parasitic relationship in this case is when you’re socializing the risk. So it’s not that we don’t have private sector investment. We do, of course, that’s socialized, both public and private are risk taking. But then the rewards are privatized. So that’s what we’ve seen in digital, it’s what we’ve seen in the health sector, where you have in the United States $40 billion a year invested by the National taxpayer-funded Institutes of Health. And then the prices of the drugs that come out of that don’t reflect that collective value creation, the intellectual property rights are structured so they are too wide, so it’s not that patents on their own are a problem. It’s how we have decided and badly negotiated to structure them.
Right. So what you’re essentially saying is there’s nothing wrong with capitalism that better capitalism can’t save, essentially?
Well, first of all, there’s varieties of capitalism, we shouldn’t forget that. There’s some countries in the world where trade unions are, you know, regularly on the board of companies — many Scandinavian countries. You also have countries, I mean just look at the Covid-19 epidemic and how recovery funds have been structured. In France, for example, President Macron was very clear. He said, well we’re not here to just bail out companies. We’re here to help transform them. So there was conditions that were attached to the bailouts that both the car industry and the airline industry got in France. They had to commit to reducing their carbon emissions in order to access the recovery funds. And it’s quite interesting, actually, with the U.S. CARES Act, which was the coronavirus, um — the beginning of the discussion about what to do with the recovery finance mechanisms. In the U.S there was kind of terminology that went in that direction. So companies getting recovery funds couldn’t just use it to pay out dividends and share buybacks. But it’s not the normal way of doing things.
Right. So let’s get to that general idea, your argument. You have a new book — your latest book — it’s called “Mission Economy“, which is the idea of governments being bold and having the entrepreneurial spirit. “Mission Economy” takes its inspiration from the well-known Apollo program. So let’s talk a little bit about the idea of moon shot, because in a lot of ways it’s already happened. But talk a little bit about this idea of the government actually being entrepreneurial when the widespread idea is that it’s not, and that it’s there to stop things from happening, or to clean up afterwards.
So the reason I took inspiration from the moon landing was that it wasn’t just about public investment. There was a lot of private sector investment, but it was very much state led. Not state led in terms of micromanaged, because that would not help innovation if you’re telling everyone what to do. But if you set a really clear goal — getting to the moon and back again in one generation — or today, getting the plastic out of our oceans or having carbon neutral cities, that’s a direction.
So setting giant goals?
Setting big goals that get lots of different sectors involved. So moon shots should not be like big castle in the desert, just the Concorde plane, a big project, a big infrastructure project. How I think about moon shots are inspirational bold goals that actually require lots of different sectors to invest and innovate. So getting to the moon was not just aeronautics. There was investment in innovation and nutrition, materials, electronics, the whole software industry in some ways was a spillover of that, and lots of private sector investment, whether it was Motorola, General Electric, Honeywell, The Grumman corporation. But what was interesting was that NASA was very careful when it was collaborating and procuring what it needed from these companies, that the contracts were fair. So they actually changed their procurement methods away from cost-plus contracts, which they believed were easily gamed because cost could be easily inflated, to fixed-price contracts with incentives for continuous improvement. They also had, believe it or not, a clause called no excess profits. In other words, this should not just become a gambling casino. If we are going to, again, share the risks, we’re going to share the rewards in the sense that you can’t just speculate and make basically privatize all the rewards from this joint enterprise. So that’s so interesting, because that to me is a real partnership with a common purpose —
Where the incentives are aligned between people?
Exactly. And another really interesting thing is that the head of procurement inside NASA, called Ernest Brackett, he was very aware that the way to not get conned and the way to have that kind of more mutualistic partnership was reliant on NASA actually investing within its own structures. At one point he said, we have to be aware of not getting captured by brochuremenship, when you have a company coming in and just kind of selling themselves.
And actually, there’s not much substance behind it. So they thought we need to invest in our own intelligence so we’ll be able to better draft the terms of reference that we need when partnering with the private sector.
And so this is an idea that government is not just a money bag that hands over the money, and then lets them more entrepreneurial private sector take over?
The allegedly more entrepreneurial private sector.
Yeah. I mean, first of all, with the private sector in “The Entrepreneurial State“, I didn’t say that government invented the iPhone. It was just that we wouldn’t have any smart product without all the smart technology, which was government financed — again, internet, GPS, et cetera. What was interesting about those technologies is they came about not only from public money, but public money that was purpose driven. So the internet was solving a problem. No one obsessed about the internet as a thing in and of itself. Same thing with GPS. So what does it mean to actually foster kind of purpose driven problem solving public organizations that are not just well financed, because you can’t just throw money at problems.
I was thinking about that the other day, the people that work for NASA. I wrote a column in The Times talking about why are we letting private citizens decide our space programs? Essentially, where is the leadership and the money and the involvement as much? And I know NASA works with Elon Musk or Jeff Bezos, so this is in —
Sorry, just one thing about Elon Musk, just super quickly.
Two things. One is, he’s received over $5 billion from the U.S. government. I actually once tweeted some years ago, “Say thank you, please.” As a mother of four children, please, say thank you. I mean, that was across his different companies. But also, the problem is when you don’t have a purpose driven kind of direction driven government, you end up maybe partnering with different organizations in the private sector, like NASA of course, is partnering with Elon Musk. But if it’s not clear what the terms are, you end up with the current situation, where you have all this debris in space.
Right, yeah, yeah.
So that’s not how you govern a system in the common interest. Where you’re just kind of saying, oh of course, we should commercialize space because that’s a good thing in and of itself. That’s not how NASA thought. NASA thought, of course, we’re going to partner with the private sector, because together we’re going to solve problems. And again, they paid attention to the contract, so the way that they would do it together was smart and dynamic and really fostering capabilities and innovation and collaboration between the organizations, but without one kind of dominating over the other.
But aren’t there limits to using, say, a moon landing as a template? Not all problems are so technological. How could a moon shot mission solve what you call “wicked” problems, like climate change, poverty, dementia? These are kind of things you need government involvement to really move the needle in significant ways.
Yep. So in the first part of the book I kind of unpick what it took to get to the moon, precisely in terms of those intraorganizational kind of government capabilities. And the second part I say, well, we need this today, obviously, to tackle all the social problems of our time. Which I do think we need to remember we’ve agreed globally what those are, and those are the 17 sustainable development goals. Number one is no poverty. Number two zero hunger, three is good health and well-being for everyone. Four — quality education, and so on. These are wicked in the sense that they require not just technological change, but also behavioral change, regulatory change, political change. So really, it needs a moon shot program even more, we just can’t restrict our understanding of moon shots just in the technological areas.
Because they have parameters. They have certain get to the moon, land on it, put a rocket down, come back, essentially.
Right, but I mean, you can still have really clear goals. I mean, a clear mission would be plastic free ocean, reducing by 90% say plastic entry in the marine environment, and so on. And the first thing is to say if this is going to be a really inspirational moon shot we need to first of all really map out all the different kind of sectors that are going to be critical to this. So that would include investment in marine areas, AI, the chemical sector, design, biotech, waste, and so on. And my key point often is there’s already a lot of money in all these different areas, but they’re not really designed in such a way that is thinking about how could we collaborate across all these different sectors, but also actors, public private third sector in order to reach that goal? So the real issue is what does it mean for redesigning, again, procurement, industrial strategy, innovation policy, to really catalyze that bottom-up experimentation and innovation. Which would mean, in this case, all sorts of projects related to say plastic and microplastic digestion mechanisms, reusable and biodegradable plastic substitutes, and so on. So just because you have a life sciences strategy that can lead you just to make a lot of public investments in areas like health innovation, and then not actually govern that to reach a particular goal. So one of the things I convinced the U.K. government was to have a challenge led industrial strategy. And the challenges they chose included things like clean growth, future mobility, and aging. And then the idea was beneath those challenges. The challenge for the moon landing was the space race Sputnik, but the mission was getting to the moon and back in one generation. So a very concrete mission underneath the challenge of future mobility might be to have a sustainable universally accessible travel, and so on. And that would require lots of innovation also in the areas of disabilities. If you want your public transport system, for example, to be 100% accessible by everyone.
One of the things, in today’s dollars, the JFK moon shot would have cost $283 billion, and there was no promise at the time that it would even work when he was saying it was not feasible at that moment. One of the things that really strikes me is when entrepreneurs that I’ve covered for decades make mistakes they call it a pivot, or failure is good. They quote Thomas Edison, “I didn’t fail. I found 10,000 ways that it didn’t work.” And it’s celebrated. When government does that, and there’s a failure, it is widely decried, there’s investigative reports, and this is the worst thing in the world. Why isn’t investment worth the risk of failure for a government, and are Americans capable of shifting their idea back to collective action that may or may not work?
It’s quite extraordinary that in Kennedy’s speech at Rice stadium he was quite clear. I mean, he said we’re going to do this because it’s hard, not because it’s easy. And we probably will screw up along the way, but it’s worth it. So what does it mean to explicitly admit that you’re going after something, but there’s going to have to be experimentation and innovation, and that’s part of that process of learning by doing. As you rightly said, today when a civil servant, public servant, makes a mistake they’re on the front page of the newspaper. So we don’t allow what everyone knows needs to be allowed to learn. I mean, you’re not going to learn how to ride a bike if you are fearful of falling off. And the whole venture capital community is always bragging about all the risk that they took for every success, six or seven failures. As soon as government fails that’s not allowed. And that’s why if you’re not even seen as a value creator, if the government is there simply to fix market failures, then there’s no real justification for you even to invest within your government institution to create that value. Learning by doing doesn’t just happen if you’re not investing within your own capacity to learn. But if you think of it as a venture capitalist, a public venture capitalist, which I think the U.S. government has played public venture capitalist role, you should also be thinking about how do we make sure we’re not then just subsidizing the failures, but also getting an upside.
Right, you get a piece of it, yeah.
Which is also stunning, is that they make these investments and get none of the return.
Well in theory, they could get a return if, again, they weren’t so naive. I mean, something I’ve written about was just how extraordinary it was after the financial crisis when Obama decided to not only have a stimulus, which was about $800 billion, but to at least try to direct it towards greening the economy. That’s why, by the way, he had Steven Chu, a Nobel Prize winning physicist, come in and direct the Department of Energy, who then set up ARPA-E. They were very interested in making investments, green investments across the board. And they had portfolios, so they invested in companies like Solyndra, which failed. Everyone knows about that because again, front page of the newspaper, rubbish government, don’t pick winners, and so on. But they also made the same amount of investment in companies like Tesla, and the world thinks that’s a private sector success. So Obama then said to Elon Musk we’re going to give you this loan — I think it was $465 million. If you don’t pay back the loan we’re going to get three million shares in your company, which was not very smart. What you’d want is shares in a company that’s successful. So again, it’s not like they weren’t thinking about it at all. They were just thinking of it in reverse.
Yeah, it’s also political, though. I think you’re maybe underplaying the politics. In the 1960s it was like we all wanted to beat the Soviets together, we had a common enemy. But American politics are now one, deeply divided, and also, the distrust of government is deep. And the idea that government is incompetent has gotten really out of hand in some ways. So how do you get to a mission oriented approach to public policy, if that’s the case?
I think we shouldn’t exaggerate, because government does end up doing lots of things that are entrepreneurial, not only those technologies in our smartphones, but even fracking was basically all government funded initially. Most of our different forms of energy were government financed, as I mentioned. Most of our blockbuster drugs trace the research back to government financing. So partly it’s that even in countries that do it, there is no proper marketing and storytelling about it. They don’t take credit. But also that we end up with not a very refined understanding of how to do that, and how to learn kind of what works, what doesn’t. So now, if you look at Biden’s plan, he’s supporting Chuck Schumer and Todd Young’s proposal for this Endless Frontier Act 2020, which will kind of revive the idea that we need proper basic science in terms of actually investing in different key technological areas. But the risk is that if you don’t have a mission oriented approach, which is again, purpose driven — I mean, the risk is that it just becomes very technology centric. And they forget that the reason actually that DARPA has been so successful in its history, including, by the way, with some of the Covid-19 technology, is that it was trying to solve problems. So we’ve just had four years of Trump’s mercantilist policy. Which was all about in the 1600s the mercantilists just worried about things like exchange rates and trade, and the walls that you had to kind of build between countries in order not to get screwed by another country, as opposed to a more active investment and innovation driven strategy, which you would advocate if you had a proper industrial strategy. Which is what Biden is saying, that in order to really compete with China this isn’t about building walls, it’s actually about becoming better in terms of investing in 21st century technology and so on. But the problem is that kind of misses the point of the moon landing, which is that a lot of that technology that spilled over in going to the moon, again, it was a spillover of actually trying to achieve something. So the real question is, what are we trying to achieve?
Anything can be defined as a mission, and then the spillover is sometimes unanticipated. The examples you’ve given for the moon, there were all kinds of technologies that fell off of a moon landing. And some of them are famous.
Well, lots — I mean, camera phones, athletic shoes even —
Home insulation, foil blankets, CAT scan, scratch resistant lenses, you could go on and on.
Right. Give me another example that isn’t as well known, because I think people do have in their minds that government has to get out of the way. That they are not helpful in that regard.
Well, I mean, in the digital and kind of computing area, definitely areas like internet, GPS, again, Siri voice activated system, in the energy area nuclear fusion, even though we don’t have it yet, you wouldn’t even have any of the investment without government funding. But also a lot of the green and the solar technology initiated with government funding. This, by the way, is a key point we haven’t said yet. It’s not that the private sector is not doing anything. It’s that the government comes in first, does the heavy lifting, invests in the most early stage high risk stage, which is exactly the opposite of the storytelling and the narrative. Which is the VC industry or the entrepreneurs in Silicon Valley are the risk takers. Well, actually no, they come in later. If you look at the biotech sector, the NIH invested 20 years before there was ever an even biotech company.
So set the table essentially?
Yeah, I mean, investing in the early stage high risk capital intensive areas before the private sector gets its guts up to come in. Which in theory, would be fine. It’s not an accusation. But because all the narrative about the value and wealth creation is on the private side, it’s not a coincidence that then the profits get privatized. Because there isn’t this idea of risk sharing and reward sharing.
So I’m not saying you’re glorifying the public sector, but the narrative has been off. And you’ve talked about the government needs to move to the driver’s seat in pushing innovation, but it already is in a lot of ways. What got you into this idea of the government as hero of innovation? I mean, your own dad was a nuclear fusion physicist.
He still believes it’s going to happen.
OK, good. Keep on dreaming. His research had a tie to government funding, for example.
Yeah, Department of Energy.
And you saw what investment from government R&D could yield. When you think of those systems, how do you get that narrative to shift? Because it’s not just a PR problem.
I mean, the first thing is to admit that economic growth has not just a rate, but a direction. And even deregulation causes a particular type of direction. Our over financialized form of growth is a direction. So if we actually care, and the first question is, do we? If — big if — if we care about direction, if we want more inclusive and sustainable growth, what is it going to take to get there? So even though there’s lots of discussions inside business about stakeholder value, the whole Davos kind of jetset talks about that all the time, that’s not really causing any change. Because that concept of stakeholder value is not at the center of the system.
So let’s explain what’s stakeholder value to people. There’s a shift that’s sometimes called compassionate capitalism. They have all kinds of names for it. But it’s the idea that there’s more than — it’s not just a shareholder that should benefit.
Yeah, and in recent years it’s become so evident just how problematic that idea of maximizing your shares. What that actually then causes is this extreme short-termism. It’s bad for people, planet, communities, and so on. So the right starting point at stakeholder value has to be whoops, we have to admit that value is collectively created. It’s not just created in business. The public sector itself is a value creator. Workers are value creators, trade unions for God’s sakes are value creators. We wouldn’t have weekends, we wouldn’t have the eight hour workday without trade unions. So and I do think that’s a very important place to begin. Your question about how do we begin to create change, the first place is to rethink our narratives but our framings, and the theory of where we think value comes from the first place. The second thing is, coming back to this issue of the economy having a direction, that obviously requires investment. We’re not going to get a greener planet and so on just by letting the market do its thing. So the question is, what do we need government to do in that? And this idea that government should just fill the gap of what the private sector is not doing is what leads us to this notion of simply fixing a market failure. So there I think we need —
So they’re the clean up squad?
You can see that in technology. There’s a lot of problems now with these technology companies. And it’s now the government’s job to clean it up.
Oh, it’s too little too late.
Exactly. [MUSIC PLAYING]
We’ll be back in a minute. If you like this interview and want to hear others, hit subscribe. You’ll be able to catch up on “Sway” episodes you may have missed, like my conversation with antitrust expert Lina Kahn, who’s rumored to be the Biden administration’s pick for the Federal Trade Commission. And you’ll get new ones delivered directly to you. More with Mariana Mazzucato after the break. [MUSIC PLAYING]
So you’ve advised Jeremy Corbyn in the U.K., Elizabeth Warren and Alexandria Ocasio-Cortez in the US, conservatives like Marco Rubio have cited your work. You’ve advised Pope Francis as part of the Vatican’s Covid-19 economy task force. It’s a broad appeal for a lot of your things. Most economists sort of pick a lane, essentially, like I’m this, I’m that, and then stick by it.
I mean, the reason I first wrote “The Entrepreneurial State” was that it was just after the financial crisis and there was this idea that in order to grow again governments needed to cut back. And a lot of the language that was being used was like oh, and we also need to become more innovative and look at Silicon Valley, and we need to do more of that and less of this kind of big welfare state. So it was like oh wait a second, hold on. If you want to talk innovation do you have any idea where the innovation in places like Silicon Valley came from? But that was being used to justify austerity. And so I wrote that book to both combat these kind of wrong assumptions that were leading to the austerity, which led to massive cuts and all sorts of areas that affected public education, public health. But also really, if we do want to innovate and grow through innovation led growth, we’re going to have to understand more about the role of the public sector. And I think that message coming to your question was equally appealing to those on the left and the right, who had —
Because want to save money versus government does have a role?
Well, I mean, the first thing is I think they were equally appealing to those sensible people on both the left and the right who realized that how in certain countries capitalism was going, was getting us the kind of problems that led to the financial crisis. And I do think Marco Rubio, I would put him in that category. Because even though he’s very different from Elizabeth Warren, he’s written about this problem again of short term corporate governance structures and value extraction and so on. Interestingly, he has positioned it as though it’s also about family values, which bringing in a bit of that conservative kind of story around it.
Yeah, why not.
But I mean, I also helped advise the Tories not just Labour. In fact I was a bit disillusioned when I helped Jeremy Corbyn because I didn’t find that he was listening very much. So I think in the end it is about ideas. I mean, those policy makers and politicians who are willing to abandon ideology.
How confident are you that they will abandon that? Because ideology seems to have taken over policy almost completely.
I mean, the reason I set up an institute which is all around these ideas, so at University College London, UCL, I set up the Institute for Innovation and Public Purpose, was that I don’t think you can just get better policies without new training. So we need bureaucracies, we just have the wrong ones. We need creative, dynamic, agile, flexible bureaucracies. That requires a particular way of thinking, and a course for it if you’re going to be a civil servant. There’s nothing like that currently in MPAs. Whereas in the MBAs, Masters in Business Administration, all the talk is that, strategic management, organizational behavior, decision sciences. We haven’t had that inside government.
So you’ve talked about, speaking of that, Covid is a perfect opportunity to relearn things. One of the things I’ve — word I’ve used a lot is Covid learnings. What are the actual learnings we’ve gotten from this, and what can we take away in a positive way? And you’ve talked about not wasting opportunities that come out of crisis. That’s where a lot of opportunities have come. What opportunities do you see in the Covid crisis as far as radical change, and are there any lessons we can learn from other economies in how they dealt with Covid?
It’s interesting how some countries, like Vietnam and the State of Kerala in India, actually did quite well compared to many advanced industrialized countries. But that wasn’t coincidental. It was because it was on the back of decades of actually investing within their public administrations, often because they had to learn from previous crises that they had. And realized that they needed those, again, capabilities within government, but also greater trust between the different types of organizations that inevitably are going to have to work together when you have a crisis — so academia, government, and business. But if we look at the vaccine, for example, it’s an outcome of huge amounts of both public and private investment. Globally it’s about $12 billion that governments have spent on the different six leading candidates that we have now. But if you don’t then govern that it’s a mess. So you have Doctor Tedros and the World Health Organization talking about the fact that we now have vaccine apartheid, almost all this hoarding of the vaccines by the rich countries. But also the intellectual property rights, which I often come back to, are being abused. And he says we need a patent pool in order to foster true collective intelligence.
Explain what a patent pool is.
So a patent pool means when you actually really share the knowledge instead of privatizing the knowledge through patents that are all privatized by different companies getting their own chunk. You have literally a pool of common knowledge where that sharing of information is fostered. And often patents, what they do is, by privatizing a lot of the information then you can’t also get the kind of imitation, replication, and experimentation. So it becomes very hard to roll it out globally.
You wrote an Op-Ed in “The New York Times” arguing for a free Covid vaccine to every person in the world. Instead we’ve seen vaccine nationalism and poorer countries getting shut out, as you just referenced. And then the drug company Pfizer didn’t accept U.S. federal funding to develop the vaccine, yet it came out with a vaccine in record time. Does that undercut this thesis? Was it competition, not government funding that fueled the breakthrough?
Well, first of all, I’m not sure that’s true. I mean, there’s global government funding. So in the Pfizer case, the BioNTech Pfizer one, they got money both from the European Union they got money, and from the German government, and the EIB had given some of the early stage, again, high risk finance. You have to look at the evolution of technology and knowledge over long time periods. So there was even in that case, in the Pfizer vaccine, if you look at the knowledge it was built on, there was lots of public money on that as well besides the immediate investment on the actual vaccine. Pfizer, by the way, is one of the most financialized companies in terms of share buybacks over net income —
Companies buy back shares and it elevates their stock.
Their stock, and a lot of executive pay is based on stock options, so absolutely.
It also means they aren’t investing in their products or making things better. It’s a financial machination, not a growth strategy, but go ahead.
Yeah, and it’s not surprising actually that Pfizer also refused to control the prices of the vaccine, so it’s multiples higher than the AstraZeneca Oxford one. But the patent pool, I mean, the whole pooling of the treatments and the data would basically allow qualified manufacturers from around the world to produce all the critical equipment, the drugs, the vaccines, without fear of being prosecuted for breaching different types of patents. And so the whole goal would be to actually lower the production costs, ease global shortages of key drugs and technology, because it’s not just about the vaccine. It’s also about all the different therapies and technologies used. Which will actually help us globally to —
To get back on our footing. And then perhaps —
Some the inventions could be privatized around cancer or whatever. That then it has the next step of the evolution of these inventions. So talk about the recovery, because as we move into recovery obviously healthy people is the critical part. That we don’t have the pandemic continuing, that most people are vaccinated. But how do you see a conditional hand out idea playing out in the U.S. and across the world around recovery? What does that look like?
I mean, if you say “build back better,” which Biden but also other world leaders have been using that for a while —
You’re entering into the space of having a particular type of recovery. In Europe, the current next Gen EU recovery, which is about $1 trillion Euros, is conditional on all the different member states actually having a plan around climate change and digitalization. In other words, they won’t actually get the package if they don’t have a strategy around these social goals. I guess by definition that’s what a build back better recovery would be. But that requires first really having a diagnosis of what the problems are. So the danger is that when you’re rushing to give out money because there’s an immediate emergency, it’s like yeah, yeah, let’s worry about climate change later. That’s a luxury, that’s icing on the cake. Let’s just make the cake for now and get growth back. And that’s incredibly dangerous. That’s why it was so interesting to see that some countries like France they said no, no, of course, we’re going to give you money right away, you need it now. But only if you commit now in this contract, it’ll take you just a minute to sign, please read here, you’ll commit to lowering your carbon emissions the last five years.
That’s not the case here, right?
No, it’s not the case yet, and I think that should definitely be a concrete part of the build back better.
Right, but when there’s no reinvestment that’s where the problem is, reinvestment in the newest ways to go. Why doesn’t that happen?
Well, again, I mean, it depends. If people don’t ask you to do something — if I don’t ask my kids to clean up after themselves, they’re not going to do it. So there’s a lack of an ask. I mean, Bell Labs occurred because there was an ask by government. AT&T at the time had a monopoly, and in order to retain their monopoly government said you need to give back. And the way to give back is A, reinvest your profits into the real economy, into innovation and big innovation beyond telecoms. And Bell Labs was the answer. There’s ways to have kind of economic renewal if again, there are conditions that when you have a coal plant closing down that maybe it won’t close down right away, but you will try to transform the coal industry along the way and create kind of a pathway transformation for the industry. You will help that industry transform towards a greener future. But that does require, again, that kind of not just asking government for a bailout, but becoming part of the solution. And this again, coming back to an example in Europe, the steel sector in Germany — and I think it was before Covid began — was asking government there for help, as steel is asking in every country, including the U.S., for help. And the conditions set by the German government for the loan that they provided to the steel sector was they had to lower their material content in order to access that public loan, which they then did. They did it by innovating. And they are now one of the greenest most sustainable forms of steel production in the world. Not because they decided to do corporate social responsibility, they had to. They had to in order to get one penny from government. And that’s what we need in some parts of the U.S., where it’s not a digital capital like Silicon Valley, but you have these sectors. That instead of just letting them completely destroy themselves or just get government handouts for nothing, there can be processes of transformation that also lead to investment, innovation, jobs, and training.
So this is putting government at the center of innovation ecosystem, right? So let’s talk about tech regulation, and here’s something we’ve done later. We’ve given — they get all the stuff, and they get no laws hindering them. But you can’t argue they haven’t created amazingly innovative products. One of the quotes you had, let me read this, “But the history tells us that innovation is the outcome of a massive collective effort, not just from a narrow group of young white men in California. If we want to solve the world’s biggest problems,” we need to understand and challenge this. So take apart this industry. What do you do here? Because that’s what’s been allowed to happen essentially, unfettered.
Yes, definitely unfettered. One of the problems is if you just, again, try to solve it afterwards you end up just picking up the mess and looking at it simply from a regulation perspective. So the first thing is to say learn that lesson and make sure that as we invest today in all sorts of new areas that there are agreements of how this technology will be used. And that it can’t be used against the very people that helped to finance us.
So what do we do about the tech? When you look at all the regulatory schemes, take away the political stuff around bias, et cetera, what should happen to these companies?
Well, if you think about how ESG metrics are used, environment social governance criteria, we should have the same thing inside tech companies, but we don’t have the equivalent for this concept of do we have metrics that big tech companies have to report against that are transparent showing how they are making their money? We could actually have metrics that would require companies to report against those, which then would also possibly direct the kind of money that they’re getting not just from government, but also from big financial institutions. So in the same way that a lot of big investment companies are de-investing in areas that they think are not green, you could form a whole movement for large financial institutions that at least pretend to care about making our world better.
We have an expression is that we stop funding the menace economy that it’s a menace to, whether it’s employees, or a social construct, or political. All kinds of things that they extract value from and then leave disaster in their wake, essentially.
Yeah, and I mean, that is what’s starting to happen around climate. So I think what hopefully will happen in the next five years is that we do the same thing for big tech. Because if we don’t do that the risk is we end up at best having these slogans like break up big tech, and you just get a lot of little value extraction machines instead of just one big one. And that’s not necessarily better. It’s not about size.
Right, so we set standards for them?
Standards, but also you need to really go after the actual sources that are creating monopolistic power. I mean, there’s often this idea that just because you’re big and your market share is large that’s a problem without actually looking at what’s led to that excessive size in terms of also — I mean, in the case of Amazon it would be very interesting to see if it was actually valued by what it did and not just overvalued say by the stock market. But also if they paid fair living wages. If they actually contributed back again to the community. If you look at a lot of the bad practices and then calculate what their actual profits would be, that’s interesting.
Yeah, like Facebook and its content moderation. The reason their business is so good is because they just don’t clean up their mess, and the rest of us pay the price.
Yeah, and also I mean, with Facebook they’re called big tech, but they haven’t actually funded the tech. So what they’re actually using is the tech funded by someone else to distribute and to put out information like Facebook does. I mean, forget the bad part, just even the good part of what Facebook is used for. But it’s not clear why we’re classifying them as tech companies and actually not media companies, you could argue. And then they’d have to be regulated like the BBC.
I have discussed this many times, Mariana. One of the things that’s important, I think, is to create sort of an entrepreneurial citizen that does understand this. That we used to be that way, the idea that everybody is entrepreneurial. What is the key to spurring innovation within the citizen themselves? Is there a way, not just to get the government more entrepreneurial, but the citizens of that government more entrepreneurial?
I mean, for sure, but that also requires people to have what Amartya Sen, a Nobel Prize winning economist, called kind of the capabilities and the opportunities that even give them access to engage. To really care about citizens as being entrepreneurial we need to look at those horizontal conditions. Having really well-funded, well-structured — it’s not just about money — public education. Let’s just shout it out again — public education. Because I don’t think any one individual is an entrepreneur. We need entrepreneurial ecosystems that really kind of distribute that capacity. It’s just so interesting to see how I mean, all the kids I know in London know about the plastic free ocean mission. Not because an academic or a minister or business leader spoke about it, but there was a really good documentary by David Attenborough called “Blue Planet“, and it just really captured people’s imagination. So in terms of how we talk about innovation, it’s not just about the space race, et cetera. There’s something about getting the creative sector, the full power of poetry, theater, music, actually making people — all sorts of people in all sorts of walks of life — just rethink how they want to live, and what kind of society we want.
So how do you get citizens both in the co-design, co-creation bit, but also knowing when to pivot? Just because you begin on a mission, if it’s not working, you should stop. I mean, that’s what DARPA has been good at, stopping and pivoting, not just going down. Knowing when to turn the tap off. So at least for those kind of missions that are about, say, carbon neutrality, if we start thinking of them in places like housing estates, or in the U.S. you call them projects — housing projects. What would it mean to bring housing associations and citizens living in particular places to the table to think about sustainability targets where they live? And how to design the public squares, the playgrounds, and how they live together.
You’re talking about giving people a voice in their own destiny. What? How dare you?
Yeah, that’s part of that predistribution agenda. It’s not just about this public private kind of sharing. It’s about bringing different voices. And Black Lives Matter, Fridays for Future, the MeToo movement, we need to bring those voices to the table in designing these missions.
All right, when you talk about all the work you’re doing, who is seeking your advice these days? What’s next on your meetings agenda? Has the Biden administration reached out to you to work for them?
So well, over the summer I mean, there was lots of names being put into the ring. And I was, I guess, I mean, I don’t know how confidential this is, but who cares. I was asked whether I was possibly interested in Secretary of Commerce, which was interesting. My answer was no. I’m not saying they would have chosen me, but there was lots of names being put into the ring. But I have been speaking to —
Why not? Isn’t the census good enough for you?
First of all, I live in London, got four children in public schools here.
No, I’m kidding. I mean, I see myself very much as a global citizen. So recently I was a special advisor of the Italian government. One of the roles I now have is — or have had for the last two years is advising the South African president, indirectly advising the pope around issues around the common good. He read my book, that was great. I’m also I just going to talk to 120 mayors, including many U.S. mayors a couple of days ago as part of the Bloomberg Philanthropy —
That’s where everything gets done.
— At the city level, I absolutely think so. But the best thing I’m doing is I’m about to announce this that I’m chairing the World Health Organization’s Council on the Economics of Health For All. It’s going to be only women.
And when people say why, I’ll say why the bleep not.
And the idea is instead of just saying invest in health because it’s good for the economy, which some have said and done research on that, it’s the opposite. We’ll say invest in health for all because it’s good in and of itself, and then work backwards and ask yourself what does it mean for the economy? How we do finance, how we do procurement, how you design public private partnerships, what it means for budgeting, deficits.
Huh. That’s fascinating. I always say that to people, I say what’s wrong with doing it because it’s the right thing? I say that to tech people all the time.
And they’re like uh — and I’m like just because it’s the right thing. That’s good enough. I don’t know who raised you. So last question, you’ve been called the “world’s scariest economist“. I’m not clear why that is. I’ve been called Silicon Valley’s “most feared” journalist. I don’t think either of us are very scary. But do you like your label? Because I love mine.
Well, I like it, and I put it on covers because I think it’s funny. But the really funny thing is, the woman who wrote the article wrote this really nice article, almost too complementary. Editors put the title, and then she tweeted after it came out in “The Times“, she’s like that’s not the right title.
So it’s interesting that an article that was all about like force and having a voice and helping to shape the world just because I was a woman, that must be scary.
So I’ve been kind of reversing it and using it as a pun.
Yeah, that’s what I do.
Like it’s a good thing if you scare the editors and they have to call you scary just because you’re making change.
Good. Anyway, this has been really fascinating. I really appreciate it. Thank you so much.
Thank you, I really enjoyed it. [MUSIC PLAYING]
“Sway” is a production of New York Times Opinion. It’s produced by Nayeema Raza, Heba Elorbany, Matt Kwong, Daphne Chen, and Vishakha Darbha. Edited by Nayeema Raza and Paula Szuchman, with original music by Isaac Jones, mixing by Erick Gomez, and fact checking by Kate Sinclair and Michelle Harris. Special thanks to Shannon Busta and Liriel Higa. If you’re listening on “The Times” website and want to get each new episode of “Sway” delivered to you, not because it is easy, but because it is — well actually, it’s really easy — download any podcast app and search for “Sway” and hit subscribe. We release every Monday and Thursday. Thanks for listening.