There are a lot of straws in the wind currently that indicate change could be accelerating in regard to how capital is allocated and to whom.
Yesterday’s online roundtable for the Reinhard Mohn Prize 2020*, Fostering Innovation, Unlocking Potential, hosted by the Bertelsmann Stiftung (Foundation), saw luminaries from politics, business, civil society and science under Chatham House rule discuss which innovation policies and frameworks are now needed to facilitate economic prosperity and societal progress in the future and strengthen our crisis resilience.
Underpinning the discussion was new research published by the Bertelsmann Foundation in a report titled “World class patents in cutting-edge technologies: The innovation power of East Asia, North America and Europe”. Out of the 58 technology areas covered, with the top 10% classed as world class in each field, the US and China in particular are setting a much faster pace in key digital technologies, such as artificial intelligence, blockchain, quantum computing and big data, the report said.
The US remains the “patent superpower”. In 50 out of 58 cutting-edge technologies, the US holds the largest number of world class patents. It is especially far ahead in health and security, the report found. But relative strength is passing to East Asia.
In 2019, China ranked among the three countries with the largest numbers of top patents in 42 of the 58 examined technologies. In 2010, the country hadn’t even been able to make the top three at all.
But the report said: “Innovations also must be aligned with the needs arising in our societies…. A modern, ambitious innovation politics should, therefore, aim not only (for) missions and targets desirable for the economy, but also for society.”
The societal impact is starting to cause a so-called techlash against unfettered or permission-less capital going to short-term or incremental innovation. Elizabeth MacBride’s article, “Why venture capital doesn’t build the things we really need,” in MIT’s Technology Review, said: “This largely white, largely male corner of finance has backed software companies that grow fast and generate large amounts of money for a shrinking number of Americans – companies like Google, Facebook, Uber and Airbnb. But they don’t create many jobs for ordinary people, especially compared with the companies or industries they disrupt.”
MacBride quotes MIT professor Jonathan Gruber’s book, Jump-Starting America, which describes three innovations the US has effectively given away because it didn’t have the infrastructure to bring them to market: synthetic biology, hydrogen power and ocean exploration, stating: “In most cases, companies in other countries commercialised the research because America’s way of investing in ideas hadn’t worked.”
More broadly, MacBride points to research showing that “if women, minorities and children from low-income families were to invent at the same rate as white men from families with incomes in the top 20%, the rate of innovation in America would quadruple”.
But in a dynamic economy, money is starting to shift. Alphabet, parent of internet technology provider Google, yesterday said it is targeting a goal of improving leadership representation of underrepresented groups within the corporation to 30% by 2025 and, writes Alphabet CEO Sundar Pichai, Google will “post senior leadership roles externally as well as internally, and increase our investments in places such as Atlanta, Washington DC, Chicago and London, where we already have offices”.
Pichai also set up a $175m commitment that includes $50 million in financing and grants for small businesses and $100m in funding participation targeting black entrepreneurs. This included increasing Alphabet’s investment in Plexo Capital, led by former GV partner Lo Toney, and the creation of Google for Startups Accelerator for Black Founders with a $5m fund run by Jewel Burks Solomon.
This topic is worth a wider discussion and the broader context will be part of the agenda for the GCV Digital Forum 2.0 on September 29.
* The 2020 prize was awarded to Nechemia Peres, son of the former Israeli President Shimon Peres and chairman of the Peres Center for Peace and Innovation in Tel Aviv.