Now this is one of my favorite books.
It was not an easy read. It is a little more dense and challenging. But as a former recovering govie, it is speaking my language. Her book is written to debunk the public opinion of a “lumbering, bureaucratic state versus a dynamic, innovative private sector.” She writes on a series of recognizable case studies – Apple, Tesla, the Internet, and dissects how every tech invention we have in our hands came from the high-risk investments the government had initially had made. This also bled into other sectors in biotech and nanotech.
She also goes into comparing different models in China and the UK of their public-private approaches. She writes that the necessary movements and the tech advancements we need to see in this world, including the green revolution, needs to be backed by “patient capital” – the kind VCs do not always have the time for, and public sector and de-financialized private sector, that got the IT revolution off the ground.
To me though, it does seem like historical and observational accounts than experiential. As someone who had been in government and had seen innovation and partnerships firsthand, I am not as optimistic.
I did enjoy the in-depth examples and the case studies.
In clean tech, VC funding is focused on some of the safer bets rather than radical innovation for the sector to transform society. The public sector money is currently funding the riskiest and the most capital intensive projects in clean tech -in the upper right corner.
Clean tech companies can face a number of challenges transitioning from R&D to commercial production and the amount of capital require to reach economies of scale is typically higher than in the IT sectors where VC wealth is originated in the first place.
Climate change could not be a primary justification for investing in energy technologies, as it could be partially be “solved” with other non-renewable technologies like nuclear power.
Given the risk aversion nature of businesses, government need to sustain funding for the radical ideas to push the green industrial revolution to support the research and development of clean technologies to their commercial viability. VCs provide the capital to bridge the transition into commercialized production, but cannot provide the capital into IPO, merger, or acquisition. Commercial banks perceive clean tech firms or renewable energy projects as too risky. Public finance firms or State development banks may foster such innovation, as they are committed to be patient. Businesses and State has been historical partners in the process of economic and technological development.
There are different types of firms and types of policies that interact to shape to meet the desired ends. It is important to be innovative about the process and to understand the division of labor between the actors in the system, the role and commitment of each actor in the context in which they all operate.
Mazzucato shows that in modern capitalism the State has also actively shaped and created markets. This required financing not only basic research but also applied research and early stage financing of companies. In doing so, the State sometimes wins and sometimes fails. This book considers how to change this dysfunctional dynamic so that economic growth can be not only ‘smart’ but also ‘inclusive’. It is a conversation the U.S. desperately needs to have.