This podcast is supported by Deloitte right now, the world is facing great uncertainty, which makes it challenging to plan a path forward. Deloitte Evolving, Respond, Recover, Thrive collection can help. It features perspectives from deLites business, technology and industry leaders created to help executives stay current on economic shifts, emerging issues and strategic options. The collection of articles and reports is updated daily. See and subscribe at Deloitte Dotcom Slash U.S. Slash covid Hyphen 19. 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 Matsuko. Since her first book, The Entrepreneurial State, Not Toccata, 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. Matsue Cato 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, Cato looks to the 1960s.
We choose to go to the moon in this decade and do the other things, not because they are easy, but because they are JFK.
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 and 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 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 term. So just in the last 10 years, the S&P 500 companies have spent over four 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 always 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?
You know, a symbiotic 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, you know, government funding, a massive amount of, you know, infrastructure or everything in our iPhones or smartphones was publicly financed Internet, GPS, touchscreen, Siri and then the private sector benefiting from that, then sucking up all the information. They often do that with their customers so that the trade, the trade that is made between tech customers, for example, I'll use that because I know 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 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. You know, there was 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 socialize both public and private are risk taking. But then the rewards are privatized. Right. So that's what we've seen. And digital is what we've seen in the health sector.
What you have in the United States, 40 billion dollars 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 there 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 regularly on the board of companies. You know, many Scandinavian countries. You also have countries. I mean, just look at the covid-19, you know, 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 US Care Act, which was the coronavirus, the beginning of the discussion about what to do with the recovery finance mechanisms in the US, there was kind of terminology that went in that direction.
So, you know, 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 is called Mission Economy, which is the idea of governments being bold and having the entrepreneurial spirit. Mission economy takes inspiration from the well-known Apollo program. So let's talk a little bit about the idea of Moonshot, 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. It was a lot of private sector investment, but it was very much state like. 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, you know, 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 moonshots should not be like big castle in the desert. Just, you know, the Concorde plane, a big project, a big infrastructure project. How I think about moonshots 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 believe 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. You know, 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, you know, 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 for 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 Brochmann ship. You know, when you have a company coming in, just kind of selling themselves and actually there's not much substance behind it.
So they thought we need to invest 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. Exactly the allegedly more entrepreneurial private sector.
Yeah, I mean, first of all, with the private sector, it's, you know, 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 finance, again, Internet, GPS, etc.. 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 and 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 the involvement as much. And I know NASA works with Elon Musk or Jeff Bezos.
So this is just one thing about Elon Musk, just specifically two things. One is he's received over five billion dollars from the US government. I actually once tweeted some years ago to say thank you, please. You know, as a mother of four children, please say thank you. You know, I mean, that was across 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 NASCAR, 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 and space, right? Yeah. Yeah. So that's not how you govern a system of the common interest where you 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, you know, smart and dynamic and, you know, really fostering capabilities and innovation and collaboration between the organizations, but without one kind of dominating over the other.
But are the limits using, say, a moon landing as a template? Not all problems are so technological. How can a moon shot mission solve? Would 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 precise in terms of those intra organisational kind of government capabilities. And the second part I say, well, you know, we need this today, obviously, to tackle all the social problems over time, which I do think we need to remember. We've agreed globally what those are. Those are the 17 Sustainable Development Goals. You know, no one is no poverty.
No. Two zero hunger. Three is good health and well-being for everyone, for 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 moonshot program even more. We just can't restrict our understanding of moonshots just in the technological areas. 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, right? I mean, a clear mission would be, you know, plastic free ocean reducing by 90 percent say, you know, plastic entering the marine environment and so on. And the first thing is to say, if this is going to be a really inspirational moonshot, 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, you know, investment in marine areas, ie, the chemical sector design, biotech waste and so on. And my key point, Austin, is, you know, there's already a lot of money and 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 micro plastic. They just mechanisms, you know, reusable and biodegradable plastic substitutes and so on. So, you know, just because you have a life sciences strategy that can lead, you just 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 that 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, you know, and so on.
And that would require lots of innovation also in the areas of disabilities. Right. If you want your public transport system, for example, to be 100 percent accessible by everyone.
One of the things in today's owns, the JFK moonshot, would have cost two hundred and eighty three billion dollars. And there is 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 10000 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 is an investment worth the risk of failure for our government? And are Americans capable of shifting their idea back to collective action that may or may not work?
You know, it's quite extraordinary that in Kennedy's speech at Rice Stadium, he was quite clear. You know, 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, right. 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 in the front page of the newspaper.
Right. So we don't allow what everyone knows needs to be allowed to learn. Right. 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 the risk that they took, you know, for every success, six or seven failures, as soon as government fails, that's not allowed. And that's why. And 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 US 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 eight hundred 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 they got front page of the newspaper, you know, rubbish government don't pick winners and so on. But they also made the same amount of investment companies like Tesla. And, you know, the world thinks that's a private sector success. So Obama then said to Elon Musk. We're going to give you the Sloan, I think it was four hundred and sixty five 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. Right.
Yeah. It's also political. 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 and 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, you know, supporting Chuck Schumer and Todd Young's proposal for this Endless Frontier Act 2020, which will kind of revive the idea that we need, you know, proper basic science in terms of actually investing and, you know, different key technological areas. But the risk is that if you don't have kind of 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, you know, we've just had four years of Trump's mercantilist policy, which was all about, you know, in the sixteen hundreds, the mercantilists just worried about things like exchange rates and trade and and the walls that you had to kind of build between countries in order not to kind of get screwed by another country as opposed to a more active, you know, investment in 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, you know, building walls.
It's it's actually about, you know, 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 not is not sometimes unanticipated like the examples you've given for the moon. There are all kinds of technologies that fell off of a moon landing and some of them are famous.
Well, lots of mean camera phones, athletic shoes, even home insulation, you know, foil blankets, CAT scan, scratch resistant lenses. You could go on and on.
All 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, you know, Internet, GPS against 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 risk, high risk stage, which is exactly the opposite of the storytelling in the narrative, which is, you know, the VC industry or the entrepreneurs in Silicon Valley or the risk takers will actually know they come in later. If you look at the whole biotech sector, you know, the NIH invested 20 years before there was an ever and even biotech company. So set the table essentially set. 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 say 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.
And a lot of ways what got you into this idea of the government is hero of innovation. I mean, your own dad was a nuclear fusion physicist, Stellas Selous. He still believes that's going to happen. OK, good. Keep on doing his research. Had a tie to government funding, for example, the 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 not just a PR problem.
I mean, the first thing is to admit that economic growth has not just a right, but a direction. Right. And even, you know, deregulation causes a particular type of direction. Our overfitting. Actualised form of growth is a direction, so if we actually care and the first question is, do you know if big, 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, you know, business about stakeholder value, you know, 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.
Let's explain what stake over value to people. There's a there's a shift they sometimes called compassionate capitalism. They've 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, but and in recent years has become so evident just how problematic that idea of maximizing your shares, you know, what that actually then causes is this extreme short termism. It's bad for, you know, people, planet communities and so on. So the right starting point, a stakeholder value has to be, woops, we have to admit that value is collectively created. It's not just created a business. The public sector itself is a value creator.
Workers are value creators. Trade unions, for God's sakes, know 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 to rethink our narratives, but a framings and the theory of where we think value comes from in the first place. The second thing is coming back to this issue of the economy, having a direction that obviously requires investment.
Right. 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 to there the clean up squad. You can see that in 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. It was too little, too late. Yeah, exactly. 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 Hsueh episodes you may have missed, like my conversation with antitrust expert Lena Kohn, who's rumored to be the Biden administration's pick for the Federal Trade Commission.
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Like it or not, we all have bubbles where we get our information and who we hang out with often just reinforce what we already believe.
But I'm betting you don't like the idea of living in a bubble. Let me help you pop it. I'm Jane Kostin, the new host of The Argument, a podcast from New York Times opinion. Each week on the show, you'll hear people who don't agree, hashing it out on the big questions, like whether to cancel student debt, if it's possible to reform the police and, yes, whether aliens exist. I have my own opinions on these topics.
We should not make contact with the aliens, which you might not agree with. It's going to get awkward. And that's the point. We'll make sure to highlight a wide range of voices to the debate isn't one sided. My hope is that you leave each episode with a broader and more nuanced view on the topic at hand and a glimpse of the world outside your bubble. You can listen to new episodes of the argument every Wednesday, wherever you're listening to this podcast.
So you've advised Jeremy Corbyn in the U.K., Elizabeth Warren and Alexandria Cosio Cortez in the U.S., conservatives like Marco Rubio has cited your work, even Vice Pope Francis, as part of the Vatican's covid-19 economy task force.
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 like, oh, wait a second. Hold on. 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 this 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, because they want to save money versus government, does have a role.
Well, I mean, the first thing is I think there were equally appealing to those sensible people on both the left and the right who realized that how, you know, 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, you know, value extraction and so on.
Interestingly, he's positioned it as though it's also about family values, which, you know, bringing in a bit of that conservative kind of story around it. 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 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 ideas?
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 is set up, the Institute for Innovation and Public Purpose was that I don't think you can just get better policies without new training. Right. 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 and an MP, whereas in the MBA is master's in business administration.
All the talk is that right? Strategic management, organisational behaviour, decision sciences. We haven't had that inside government.
So you've talked about speaking of that, covid is a perfect opportunity to to relearn things. One of the things I word I've used a lot is Cauvin learnings. What are the actual learnings we've gotten from this and what can we take away in a positive way, as you've talked about, not wasting opportunities to come out of crisis's. 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 it?
You know, it's interesting how some countries like Vietnam and the state of Kerala and India actually did quite well compared to many advanced industrialised 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 realised that they needed those again, capabilities within government, but also greater trust between the different types of organisations that inevitably are going to have to work together when you have a crisis.
So academia, government and business. But, you know, 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 dollars 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, you know, Dr Tedros and the World Health Organisation 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 privatising the knowledge through patents that are all privatised 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 information that 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 New York Times arguing for a free, cold vaccine to every person in the world. Instead, we've using vaccine nationalism in 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 is there's global government funding, right? In the Pfizer case, the biotech 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 a long time period. So there was even in that case and 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 financially companies in terms of share buybacks, you know, 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.
And, you know, 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, you know, 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 get, you know, to get back on our footing and that some of 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 in the 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, you know, Biden, but also other world leaders have been using that for a while. Right. You're entering into the space of having a particular type of recovery in Europe. The current next gen EU recovery, which is about one trillion euros, is conditional on all the different member states actually having a plan around climate change and digitalisation. In other words, they won't actually get the package if they don't have a strategy around these social goals is 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 emergencies like, yeah, yeah. You know, 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 will take you just a minute to sign. Please read here. You know, you'll commit to lowering your carbon emissions the last five years. That's not the case here right now. 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 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 right. So there's a lack of an ask. I mean, Bell Labs occurred because there was an ask by government. You know, 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, you know, 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, you know, 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. US Steel is asking and every country, including the US, for help, and the conditions set by the German government for the loan that they provide to the steel sector was they had to lower their material content in order to access that public loan, which they that did. They did it by innovating.
And they are now 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, you know, destroying the. Selves 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. Here's something we've done later. Like we've given they get all the stuff and they get all 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 who 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 and 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 help define us. So what do we do about the tecum?
When you look at all the regulatory schemes, take away the political stuff around bias, etc., 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. It's high tech companies, but we don't have the equivalent for this concept of, you know, 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.
Right. So in the same way that a lot of big investment companies are investing in areas that they think are, you know, 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 is a menace to whether it's employees or the 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 the you know, 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.
You know, 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 you're in your market share is large. That's a problem without actually looking at what's led to that, you know, excessive size in terms of also, you know, I mean, in the case of Amazon, it'd 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, you know, fair living wages, if they actually contributed back again to the community.
You know, 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 don't 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, I get the bad part, just even the good part of what Facebook is used for. But it's not clear why we're reclassifying them as tech companies and actually not media companies, you can argue, and that they'd have to be regulated like the BBC.
I have discussed this many times. Marijana 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, you know, to really care about citizens is being entrepreneurial. We need to look at those horizontal conditions, having, you know, 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.
Right. 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. Our 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 and all sorts of walks of life just rethink how they want to live and what kind of society we want. Right. So how do you get citizens both in the code design creation that but also knowing when to pivot just because you begin on a mission if it's not work and you should stop. I mean, that's what DARPA's 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 the US, 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? Right. And how to design the public squares, the playgrounds and and how they live together.
They're talking about giving people a voice in their own destiny. What? How dare you? Yeah, but that's part of that redistribution agenda, right? It's it's not just about this public private kind of sharing. It's about bringing different voices and, you know, Black Lives Matter afraid for the future of 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 are seeking your advice these days, what's next on your meeting's agenda?
Has the Biden administration reached out to you to work for them so well over the summer? I mean, there is lots of names being put into the ring. And I was I guess I may not know how confidential this is, because I was asked whether I was possibly interested in secretary of commerce, which was interesting. My answer was no. I'm just 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?
Why isn't the census good enough for you? First of all, I live in London, got four children and public schools here. All right. Right. I get I mean, I see myself very much as a global citizen. So recently I was the special advisor of the Italian government. One of the roles I now have is or I've had for the last two years is advising the South African president and indirectly advising the pope around issues around the common good.
He read my book. That was great. And also I just get to talk to one hundred and twenty mayors, including many US 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. And but the best thing I'm doing, the best thing I'm doing is I'm about to announce this, that we I'm chairing the World Health Organisation's Council on the Economics of Health for all.
It's going to be only women. And 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 will 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. You know, I always say that to people. I said, what's wrong with doing it? Because it's the right thing. I said that sick people and they're like, and I'm like, just because it's the right thing, like, that's good enough, you know, 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 on covers because I think it's funny. But the the really funny thing is the woman who wrote the article wrote this really nice article. Almost two complementary editors put the the title and then she tweeted after it came out in the time, 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 yeah. Like it's a good thing if you scare the editors and they have to call you scary 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.
Hsueh is a production of New York Times opinion, it's produced by name Abaza Hebeler, Bonnie Matchpoint, Daphne Chen and Vishakha Darba, edited by Nyima Rozz and Paula Schoeman with original music by Isaac Jones, mixing by Eric Gomes and fact checking by Kate Sinclair and Michelle Harris. Special thanks to Shannon, Busta and lyrically. If you're listening on the Times website and want to get each new episode of Hsueh delivered to you, not because it is easy, but because it is.
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