Technology

Which Risk Takers and Which Big Bets?

By Dweep Chanana ⋅ March 16, 2009 ⋅  Email this post ⋅  Print This Post ⋅ Post a comment

Thomas Friedman, the much celebrated author of The World is Flat and a well-regarded columnist at the NYTimes, has the solution to our economic woes and the climate crises.

Writing in February for the NYT he suggested that the taxpayer call the “top 20 venture capital firms in America” and give them USD 1 billion each for “creating jobs.” That would be a much better use of the money than investing it in failed firms such as GM or Chrysler.

Mr. Friedman is right that startups are risk takers and that GM and Chrysler might create more value by going bust. But VCs themselves were quick to pooh-pooh his suggestion, indicating that they do not need more money and besides, “Nothing kills a great idea like too much cash. Unless it’s a flood of too much taxpayer cash, because then we all lose.”

In a more recent column for the NYT, however, Mr. Friedman has gone further to suggest not only that the government needs to fund innovation, but that it also should decide how it should be funded:

But here’s what I do know: President Obama’s stimulus package has given a terrific boost to renewable energy. It will pay lasting benefits. And we need to keep working on all forms of solar, geothermal and wind power. They work. And the more they get deployed, the more their costs will go down.

But, in addition, we need to make a few big bets on potential game-changers. I am talking about systems that could give us abundant, clean, reliable electrons and drive massive innovation in big lasers, materials science, nuclear physics and chemistry that would benefit, energize and renew many U.S. industries.

There are several problems with what is an extension of the original “lets fund VCs” argument.

First, it is disingenous to say that “without some game-changers, climate change is going to have its way with us.” That’s because climate change is going to have its way with us anyway. There is no technology, current or in development, that can take away existing atmospheric CO2 or arrest and reverse temperature increases.

Second, while it is true that an innovative society depends both on incremental and disruptive advances in science and technology, it is ridiculous to suggest that the allocation of resources to those specific research efforts is wanting. Why, after all, should nuclear fusion (the example used by Friedman) be favored over nanotechnology – which might help help us adapt to climate change – or agricultural research?

The basic argument in both articles is circular – it presumes that resource allocation towards R&D is broken and thus must be fixed. But neither is that resource allocation fundamentally broken, nor is the proposed solution any better than the alternative of doing nothing. Mr. Friedman has the luxury of being provocative without working through the details of his ideas. Yet, for the rest of us the devil does lie in the details.

Tags: climate change, innovation, science, Technology