How Governments Can Shape Technology

Transcript for Season 2, Episode 6: How Governments Can Shape Technology

Kurt Andersen: Welcome to The World as You’ll Know It. I'm your host, Kurt Andersen.

Technology companies have transformed our lives, in some ways improved the world, for which they’re celebrated as innovative risk-takers. What gets talked about less is the fact that Apple, Facebook, Google, Tesla, and many more have been built on top of technologies pioneered and funded by the federal government: the internet, GPS, artificial intelligence, breakthrough medicines and many many more. 

For this season’s final episode I’ll be talking with Mariana Mazzucato, who in the last decade has become one of the world experts and agitators on these questions. She’s an economist, professor and author best known for advising governments all over the world on how to make the future one we want our children to inhabit. I am delighted she’s here.

Kurt Andersen: So this series is called The World as You'll Know It because we are trying to see what the future could look like and actually I've started saying futures plural, because one of our premises is that we can and should be collectively choosing and designing and creating the best one that we can get. Especially as concerns technology, because of course it can enable  unimagined prosperity and health and contentment for people and societies. But, as we've also seen, gigantic dangers, making inequality worse, making viral falsehoods much worse. So the big question I want to talk about with you about basically: On this spectrum between dystopian future and utopian future, how should we use government and other social means to push things in that preferable direction? So for listeners who don't know you, one of your big ideas is reviving the old idea that governments can have a lot to do with getting us more toward that good version of that future, right? 

Mariana Mazzucato: Yes, in other words, we can't talk about better policies because I'm sure everyone knows about a policy they would like without actually having the capacity, the creativity, the capabilities within governments, which I think we've actually lost because we've forgotten what government’s for. So there's no real incentive,  motivation to invest within government institutions and what I would call the dynamic capabilities of the public sector. 

Kurt Andersen: And one of the things -- the reframings that you do that I think is really important and it doesn't happen with one book or 10 books or 100 books, it takes time -- is to think of, well, our governments are just us; they're the means we have invented and created to to get what we, most of us, want. So rather than this enemy or idiot or, you know,  incompetent civil servants, it's it's us, right? When I first knew of you and first heard you talking about The Entrepreneurial State, your book that I know about as your first, was talking about all of the ways in which the US government in particular, has since I was a baby, if not before, been funding all of the great things that we depend on and no longer think of as government programs, right? So just if you can, like, tick through that incredible list of stuff that the government has done over the years to make people start thinking like, yeah, I never thought of that. That would be great. 

Mariana Mazzucato: So the key thesis in The Entrepreneurial State is that while in the United States we pretend that it's all about a market driven, you know, a free market society, actually the US, even more so than Europe, has had a very active, visible hand of government. You know, we would have stupid phones, not smartphones without the U.S. government. Everything that makes our smart products smart, like the Internet, GPS, touch screen, and Siri, actually came out of public organizations like DARPA, which funded the Internet, the Navy that funded GPS. And even more importantly, why they funded those things was not because they were tech obsessed. They didn't care about the Internet. They cared about the problem that the Internet ultimately solved. So in DARPA's case, it was to get the satellites to communicate. So I've become very interested in this. First of all, why don't we talk about it, you know, come out of the closet that we have these organizations? But also, what does it mean to have a purpose driven, problem solving public organization as opposed to what we often have in the public sector, which is just a lot of guarantees, subsidies given out to different types of firms and sectors without a goal orientation. And I would actually argue that today in space, you know, Richard Branson, Elon Musk kind of doing space tourism, that's not really about public purpose. That's, you know, filling space with debris. So if you actually look back at how NASA, for example, organized the moon landing, it was very purpose oriented. It restructured its internal organization in order to be purpose oriented. But it also redesigned the contracts with the business sector in order to be purpose oriented. 

Kurt Andersen: Right. And I, and I have just read Mission Economy, your latest book in which that comparison and analogy and illustration is, you talked about at length. And I want to talk about it at length as well. But but beyond creating the Internet and beyond actually creating GPS, I was reminded like, this isn't just a funding thing. It was a Navy thing. Right? They owned it. We owned it until suddenly we gave it away to Google and everybody else. 

Mariana Mazzucato: But the same thing in the health sector, I mean, in Entrepreneurial State, I look at not just kind of the digital information and communication technology sector, but also the health sector and what is emerging to be a green revolution. And in all these three different areas, what's interesting with these public investments is that they actually took on the early stage risks. Later on the private sector comes in, which of course, is very important. And, you know, Steve Jobs with, you know, Apple and so on, very important in terms of actually packaging up a product as elegant as the iPhone and all the different i-products. But why do we then pretend that the role of the state is at best about fixing market failures and not actually being an investor first resort and an entrepreneurial agent? 

Kurt Andersen: Right

Mariana Mazzucato: And as soon as you admit that, you ask very, very different questions, like hold on a second, if you're taking all the risks, why are the rewards going private? 

Kurt Andersen: Right. And when you mentioned market failures, as you do repeatedly because you're an economist, we mean things like, when the American auto industry a decade ago, a dozen years ago, was saved because it was failing, right? By the government. 

Mariana Mazzucato: But so what economists mean by market failure is that basically there’s different… Well, first of all, they start off with the idea that markets are the kind of ideal way to set up a society. And there's a whole concept of Pareto optimality, which I won't bore your listeners with. But the point is that sometimes markets fail and they can fail because of different types of criteria, which are things like positive externalities. What does that mean? It means that, for example, if something that the private sector does like investing in research and development, if the benefits of that are positive to all sorts of other types of actors, then they're going to have less of an incentive to invest in that. So when you have public goods like clean water or a defense system or the benefits of public knowledge, then the private sector is not going to invest in it. And so the public sector has to invest in it. So they fix a market failure by funding, say, public R&D.

Kurt Andersen:  Right. It's not only big failures, it's it's: Wait, if the incentive system doesn't make you create this miracle drug that will make everybody cured of, say, coronavirus, let's have the government nudge you toward that. 

Mariana Mazzucato: Yes, but so my point is that actually the advances like the ones we just talked about, from the Internet to GPS to most of the new molecular entities with priority rating, which are the big blockbuster kind of drugs, didn't come about by government simply fixing a market failure and patching up a bit of basic R&D here and there. These organizations, like the National Institutes of Health, DARPA and so on, have been most successful when their remit has been about co-creating and co-shaping markets, not just fixing them. And yet, you know, economists don't talk that way. And practitioners who are informed by economists then don't actually, you know, learn from what it actually means to be an active investor, first resort, creating and shaping markets, not just fixing them. The problem is if the government is always just putting bandages here and there, filling the gap of something the private sector is not doing or correcting for something the private sector is doing, you will always be too little, too late. You will always be in bandaging-up mode. And that's not going to get you a transformation. 

Kurt Andersen: Yeah, and so it's not waiting for failures. It's steering the car.

Mariana Mazzucato: Exactly.

Kurt Andersen:  It's having your hands on the driver’s wheel.

Mariana Mazzucato: Exactly. But that scares people, right. Because government's not supposed to steer. You're supposed to just kind of level the playing field, you know, enable, derisk the private sector, fix market failures and please then get out of the way. 

Kurt Andersen: And what we should think about it is pilot, copilot, you know, I mean, we both have a right to to steer sometimes. So we could go on and on about, for instance, the almost $500 million loan that you mentioned Elon Musk got when he was putting together Tesla from the U.S. government.

Mariana Mazzucato: And the five billion in total for everything he's done from the U.S. government, but yeah..

Kurt Andersen: Billions, the tens of billions that the NIH National Institute of Health gives every year to pharmaceutical companies...

Mariana Mazzucato: Forty billion every year. 

Kurt Andersen: It's incredible. And yet, like, if they then if they take that and create, you know, Remdesivir or some miracle drug, it's all on them.

Mariana Mazzucato: And the price can go to whatever the market will bear, as it has with Remdesivir. 

Kurt Andersen: Exactly. So we are -- we people, citizens, governments -- are bad investors. We're stupid, easy, dumb money, in your view, it seems to me, and you're saying I think that the entrepreneurial paradigm is good. And risky, innovative new ideas and blue-sky business plans and spreading financial risk and staying hungry and staying foolish, as you say Steve Jobs said, accepting failure sometimes -- all that's great, but it should not just apply to the twenty-nine-year-old boys in Silicon Valley, it should apply to all of us who are citizens running a government. 

Mariana Mazzucato: Yeah, I mean, the reason that capitalism is different from feudalism --  and capitalism, by the way, has not been around forever. It's about 300 years old. What came before capitalism was feudalism, which was lots of inertia. Things actually didn't change. So in terms of  actually looking at the key source of growth and long run growth under capitalism, it has been technological and organizational innovation. You know, Adam Smith wrote about that. David Ricardo, Karl Marx talked a lot about that. And Marx also then asked questions that people are asking today, like what happens to employment? What happens to wages? Right? You know, robots are taking our jobs. Anyway, so, you know, my point is actually that the word, “entrepreneurship” and risk taking has been captured by a very small, siloed group of actors, which then have also used it to capture an excess of returns beyond what they've actually done. Right. So the problems we have today, if you look at the U.N. Sustainable Development Goals, which every country, including the United States, has actually signed up to, you know, we should be turning those into moonshots, you know, from the no poverty, zero hunger, good health and well-being, quality education, gender equality. There's no reason why we couldn't kind of treat them with an equal amount of urgency that we treat winning the war. But that means actually taking them seriously. And what we've just seen with Covid-19 is we do take a health pandemic extremely seriously and all of a sudden create trillions of dollars, but it's too late. We've allowed a health pandemic to occur and be much worse than it had to be because we have been underfunding health systems. We were not able to deliver,

Kurt Andersen: Right.

Mariana Mazzucato: You know, personal protection equipment to frontline workers. That is much easier than getting to the moon. But the social problems are actually harder than getting to the moon. I mean, this means having behavioral change, regulatory change. You know, there's all sorts of, you know, very complicated things that need to be done. But the first point is, do we actually even care? Are we treating...

Kurt Andersen: Right.

Mariana Mazzucato: You know, you know, solving big health problems or the digital divide where so many kids don't have access to their human right to education, with an equal amount of urgency, seriousness, investment and innovation that we treat, you know, winning World War II? 

Kurt Andersen:  I mean, the issue here is that for a few decades, for the whole digital revolution really, we’ve, we have ceded control totally to unregulated private companies. And maybe arguably that was OK for the first phase of the digital revolution, but it seems as though we are now in a phase two where you have Google and Facebook and Amazon and so on -- these giants -- that if not all literally monopolistic are, are, are nearly monopolistic companies. So now in this new second phase how do we align with what they are doing in order to serve the common good? 

Mariana Mazzucato: Well, first is the narrative, right? I mean, we often called these companies big tech companies. And, you know, as we've just said, most of the tech behind big tech was not funded by big tech. It was funded by government. So, you know, what would Google be without the Internet? What would Uber be without GPS? Now, of course, within these companies, there is a lot of investment and innovation. So it's not about dismissing them. But some of the most, kind of interesting innovation that companies like Facebook have done has actually been more, one could argue, in the media sector. So what would it look like to actually regulate, you know, Facebook as a media company, you know, similarly to how we regulate the BBC and, you know, where you're not allowed to have fake news, where, of course, you have to be careful with issues around privacy. So in terms of the regulation side, what are we regulating? And the myth and the storytelling and the narrative that these are big tech companies -- so you have to just think about the, the kind of technology regulation -- misses the trick of what these companies actually are. That's the first point.

Kurt Andersen: RIght. 

Mariana Mazzucato: Second is, given that the technology itself, again, mainly came from public funds. Similarly, by the way, with artificial intelligence today, with driverless cars, which again came mainly from the military initially, and in the health care sector where we've already talked about how whether it's for the vaccine or so many other types of drugs and cancer, diabetes and so on, the early stage, high risk capital intensive investments come from the public sector. What does it mean to govern innovation for the public interest, for the common good? 

Kurt Andersen: And I just want to say, one of the reasons I think your approach has attracted so many admirers is you're not saying, slam on the brakes, make government run it all.  Or, just do nothing but step on the gas. It's again, to extend my driving metaphor on all this, it's it's it's both. I mean, right? 

Mariana Mazzucato: It's both. But I even before when you said both and I cringed a bit. And the reason I cringe is this idea that it's about partnering, you know, that, you know, both at the steering wheel and let's do this together. That's not enough. So I actually think we need better metrics for what kind of partnership.  As you're sitting there, you know, on the wheel, both of you, both partners, you know, driving, what are you doing to each other? You know, what is the nature of the conversation? Is it an abusive conversation? And, you know, in writing my most recent book, Mission Economy, I actually looked at how much care NASA took to make sure that the partnership was not abusive. So there was this guy, Ernest Brackett, who was the head of procurement at the time of the Apollo program in the 60s, who said something so interesting and I keep quoting it. He said, we need to be careful that we ourselves -- so the public institution he was talking about was NASA,  but think of it more broadly today as government -- that we ourselves invest in our brain, basically. Invest, for example, in internal intra organizational R&D, even if we're partnering with the company that's doing R&D and we're going to use their R&D and partner around it, if we aren't intelligent ourselves investing in our own capacity and capabilities, we won't even know how to partner. We won't know how to write the terms of reference. And in quotes, he said, “We'll get captured by brochure-manship,” and what he meant by brochure-manship, because at the time there was no sexy power points that, you know, KPMG would bring in. There was these nice little brochures.  And he knew that if NASA became stupid, they would end up just looking at the sexy brochures and say, OK, we'll partner with you. And, you know, they didn't want to do that. They wanted to partner with the best companies possible and then to design the procurement, for example, in a way that was fair. So they even had a no excess profits clause. But, you know, which is so interesting, today. No excess. 

Kurt Andersen: Now that excess profits are no longer an acceptable even concept. 

Mariana Mazzucato: Exactly. But isn't that interesting? And I don't think there's NASA no excess profits today. I mean, it'd be really interesting to see if they still include that in the clauses, because what I've seen happen -- I actually wrote a report for them six years ago to look at low earth orbit (LEO), as an emerging economy. And I started to look actually at the kind of narrative within NASA about ...

Kurt Andersen: And by the way, I saw that. What is, what does that mean, even? Low Earth orbit economy. Is that GPS-ish…?

Mariana Mazzucato: Well, it's the International Space Station, basically. It's, it's, you know, how to go up and down from the station. What is actually done there? The science. And in fact, a lot of the pressure on NASA was to show that the International Space Station also could produce economic value.

Kurt Andersen: But the other big thing about NASA and the Apollo mission and all the great DARPA funding breakthroughs, is that they are strictly technological challenges: “Get to the moon in 10 years.” And we do. And they were also –– the space program and even the interstate highway system –– all had military national security justifications. So it’s, “Spend whatever’s necessary to solve the problem, sky's the limit.” Whereas these current huge domestic social problems that need solving don’t have that urgency of, of military threats...

Mariana Mazzucato: Yes, so I would unpack that, which is first of all, even the military missions and the, you know, NASA space mission wasn't just about the military sector or aeronautics in the case of Apollo. There were so many different sectors from nutrition, electronics, materials, the whole software sector in some ways, one could argue, came out of that as a spillover. In other words, so many different sectors were involved. And that is important because a lot of the things that we now take advantage of on Earth, like camera phones, athletic shoes, home insulation, foil blankets, scratch resistant lenses, computers...

Kurt Andersen: Computers. Small computers.

Mariana Mazzucato: Exactly, small computers. And the software within them, were --- baby formula -- were all kinds of spillovers from the Apollo program. And that is important because then if we actually today, for example, think about the problems and this is your main point. If we start thinking about social problems: the digital divide, different actually aspects of inequality, climate change, you know, having carbon neutral cities or getting the plastic out of the ocean, if we actually structure it and what I call a mission oriented way, it could be a real intersectoral opportunity for massive innovation and investment, new forms of collaborations, mutualistic not parasitic partnerships that can along the way also get us all sorts of unforeseen innovations that will also produce not only economic growth, but produce, you know, new sectors and new technologies and so on. But the social problems are much harder. They also require, you know, regulatory change, behavioral change and so on. And so we shouldn't pretend that it's the same as going to the moon. But the problem is that we tend to treat social problems as just spending. You often don't hear about government investment, you hear about expenditure, and then we worry about deficits and the debt and what's going to happen to inflation when it's social.  When it's a military or again, last minute health pandemic, too little, too late, we just kind of, you know, flood the system with money and don't ask right away at least, what is it going to do to the deficit because it's treated as urgent. So the real kind of change in mindset is, let's start treating our deepest social and environmental problems equally urgent that we've treated in the past, you know, Cold War, military types of problems. And let's structure it with the dynamic national system of innovation and dynamic partnerships that are mutualistic, public and private. But take care that we're governing it along the way with common good, public interest kind of criteria and metrics. 

Kurt Andersen:  That's a difficult thing to reframe. Right. To sort of say, these these soft things are investments when they are not building physical infrastructure, so there is obviously a big political set of problems there. You mentioned and obviously climate is the big one that has these, obviously, technological aspects to the solutions, but also are hugely cultural, social, economic and otherwise. So how would you, you're the, suddenly, the czar of America and say apply that to this problem? Because part of your thing is, well, let's not just say, oh, we're solving global warming.  You are all about, yes, inspirational missions, but also defining it carefully and deadline-specific metrics. So what what should that be in the case of addressing the climate crisis?

Mariana Mazzucato: Well, first of all, it's not up to me as an economist to go around telling people what their missions are. That does mean also within countries or cities or regions to actually bring different stakeholders together to decide what that might be. So in Europe, for example, there is a mission on the back of some of the work I did with the European Commission to have 100 carbon neutral European cities by 2030. So that's the mission. You know, you can actually answer: Do you have that or not, by 2030? Whereas just the word climate change, you can't answer it. Second, like we just talked about before, with the Apollo missions, so many different sectors were involved. So how can you make sure your industrial strategy, for example, doesn't take climate as just about renewable energy, as a sector within other sectors, having their own strategies, but actually using these climate missions like a carbon neutral city to bring together as many different sectors as possible from real estate, construction, transport, food, our mobility systems thought about more widely, so an intersectoral approach. And that's really important because so many industrial strategies across the world literally just end up being a list of sectors that we end up giving money to, for example, life sciences, as opposed to asking what is the problem that you want your life sciences sector, that you want your nutrition, energy, mobility sector to be addressing? Third, beyond this intersectoral approach, you need to, below that, start thinking: What does government then actually do to foster as much experimentation as possible, innovation, risk taking in the private sector, but also, you know, the the civil society or third sector, as it's sometimes called. So different types of public, private, third-sector organizations to innovate, invest and collaborate in new ways in order to address those problems. 

Kurt Andersen: Such as universities and public education, higher education, which are in the NASA case and the Apollo program case, hugely integral to that success. 

Mariana Mazzucato: Absolutely. But I'm actually thinking even more granular, like how can you redesign the grants given to universities, the loans, the procurement policy. So procurement for those who don't know what it means, it's a chunk of government budgets, often a very large chunk, which is about government as buyer, not just kind of investor, like the NIH example we gave, our government is investing and putting money into the system as an innovator. Government can also buy stuff, right? So buying school desks, buying hospital beds, buying cement to make things. If you can have green procurement and have really kind of, you know, dynamic conditions within procurement contracts like the example I gave before with NASA to make sure that you are fostering as much experimentation to solve goals so that your procurement budget becomes part of your innovation budget, as opposed to just being a contracting exercise, grants, loans as well.

Kurt Andersen: So I don’t wanna be too glass half full, Pollyanna about this but we have with this vaccine rollout this sort of remarkable example of the success of public private partnership working on a mission, right? We have gotten a majority of people in America vaccinated with a vaccine that didn’t exist a year ago to protect against a disease that didn’t exist even two years ago through this public private partnership. Or I think of what’s happened in the last couple decades to the price of renewable energy, of solar and wind. The cost has gone down and it’s competitive with fossil fuels, as a result of the federal government shaping the market for energy in a bunch of ways to encourage that. Don’t those, shouldn’t those, won’t those get a lot of people to start thinking, Hey yeah, big government’s ok. It can and must do a lot of big things, and then carry on that spirit to climate change and the rest of our existential, social, national problems? 

Mariana Mazzucato: Yes, but just coming back to the vaccine, first of all, there's lots of different vaccines out there and, you know, huge amounts of public and private money that went in. But how the partnerships were structured mattered. So the AstraZeneca vaccine with Oxford, the public sector scientists, because they are, Oxford and Cambridge are our public universities, took care to make sure that the costs of that vaccine and hence also the price remain contained and all sorts of other conditions, including those around the intellectual property rights. They negotiated quite strongly around them. That wasn't done with the Pfizer vaccine. I think there are also lessons for climate. You know, I actually chaired a discussion with Mark Carney around who owns what and why in the future of green energy and, you know, the Green Deal. And that matters because just think of the word the “green deal.” The word deal is about the social contract, the green bit, as Greta Thunberg always says, ‘let the scientists tell us what to do.’ But the deal bit is actually about rethinking, again, public private partnerships, but also labor. You know, currently we have the profit share of global income because you can divide GDP by different income sources. The profit component of global GDP is at a record high. The labor share is at a record low, and these profits that are being earned are actually not being reinvested back into the economy. To a large extent, they're being financialized. So you have something like four trillion dollars having been used for just buying back shares in the last 10 years by the S&P 500 companies. 

Kurt Andersen:  And that’s the thing that people have to understand I think.  It's such an important part of your argument, which is that the government -- directors of agencies, civil servants -- need to be thinking more like dealmakers on Wall Street and the city of London. Right. To make tough deals, to get what we want, which isn't just high share prices are high profits, but this social good. 

Mariana Mazzucato: So, yes? But not to worry about the deal, just in terms of the money, because then you end up turning the public sector into a private sector, just kind of profit maximizing machine. So that's why I've set up an institute in London through University College London called the Institute for Innovation and Public Purpose so that, you know, the word public purpose is key. That's what government should be about.

Kurt Andersen: You mentioned before, the problem of social media that is allowing all kinds of falsehood to go viral and affect our politics and society in variously bad ways. And which isn't about building new things to solve problems, it is about, OK, we've got this problem how do we solve that?  I'm wondering, what are the fixes there? I mean, like this Nobel economist, as you know, Paul Romer recently said, OK, well, the way to fix that problem is to have a really aggressive tax code on these big Facebook-like Google-like companies to discourage digital advertising as the basis for their wealth. Is that a good idea? What what specific ways should we, frankly, radically change that market to to reduce the harm that is being caused? 

Mariana Mazzucato: So I do agree with that. And I wrote about it in my other book called The Value of Everything, where I argue that we've also lost an economic theory, but also in competition commissions and authorities the notion of rents. You know, rents and profits are not the same thing. And Adam Smith, you know, back in the day when he was writing, he called rents theft. 

Kurt Andersen: And by rents, we don't mean renting real estate. 

Mariana Mazzucato: No, no. I mean actually making money also in excess of what you're actually doing by charging different types of fees or putting you know intermediary kind of processes in the middle that capture profits in excess basically of what you're doing.

Kurt Andersen: The rigging of the system.

Mariana Mazzucato: The rigging of the system. Good point. I mean, good, good summary. And so I actually have a new project funded by the Omidyar Foundation looking at what we're calling algorithmic rents. So if you look at how Google and Amazon operate, actually initially the algorithms were used in a way that was quite different from how they're being used today. And one could argue, without kind of being too pedantic about it, that it really was about creating value. So, for example, if you look at their supply chain and the suppliers that are trying to sell things on on the search engines, they they were quite visible, depending on what you actually put into the search engine. But today, what you're seeing is what Google and Amazon want you to see. So, you know, Shoshana Zubov talks about this in her book, Surveillance Capitalism. She says, you think you're searching Google for free well actually, Google is searching you for free, in order to kind of convince you that you need certain things that you might not even know you need. And it's affecting what you see. That should be surely not only transparent so people know that's happening, but also in terms of the kind of taxation on the advertising revenues that Romer talks about that could be embedded within how we think about competition policy, that we actually steer the system in such a way that it's really creating value, not extracting value in these ways that one could argue are purely about rent seeking. 

Kurt Andersen: Is it I mean, you know, utilities -- water, electric, gas -- the rest are, if not publicly owned as they are throughout the United States in many places, certainly heavily regulated. Is that how we should begin thinking about these, you know, what are utilities, what Google is a utility. Facebook is a utility.

Mariana Mazzucato: Um yes. And I think it needs to be founded on two points: First of all, that, you know, access to your own data and keeping it private and not getting conned into wanting things you don't want. That should be a human. Right. Right. So you should begin actually with human rights and that notion of, again, the common interest in the public good. And that's why you need to regulate this as a utility. But also I'm, I'm always -- how do you say -- reticent to just use the word regulation. Because then it looks like you're saying, “Value is created by these companies, oh, but we need to regulate it so it doesn't get out of hand.”  So I would say, well, hold on, yes, we need to regulate it. But first, talk about value creation. This value is created, co-created also with the public hand, and hence it must be regulated in the interest of the public. Whereas if the narrative continues to be wealth creation is all in Silicon Valley and then you need government  to come in to tame the process so things don't get out of hand, and we protect people and it's purely kind of redistributive and regulatory without disrupting the narrative, the storytelling, then it's going to be much harder to have kind of long lasting, proper, long-run regulation for the common good. We have to debunk the story itself of where this technology came from. 

Kurt Andersen: As I was as I was thinking about you and your books and The Entrepreneurial State, which came out in 2013, which was almost the very moment when President Obama got in so much trouble for saying, ‘Listen, government builds the Internet, the infrastructure, the roads, the bridges. You didn't build your successful business yourself. You know that.’ And then got hell for that by having that be taken out of context. And which is which is to your point, it's tricky, but it's an important thing to tell the story, right? 

Mariana Mazzucato: Yeah. And that it's not just about the roads and the infrastructure. It's literally the algorithms. You know, the Google algorithm was funded by the National Science Foundation. Which doesn't mean Google isn't important. This isn't about attacking the private sector to say you're rubbish. It was all public. Of course not. Google is incredibly innovative. But it does mean how can we structure, you know, the grants themselves, even that one that was given to Sergey Brin and his partner when they were, what was it, at Stanford, could have actually had some conditions attached, which is both what comes out cannot be used to abuse, but also the profits earned. If you earn over X billion, part of, you know, the money will come back to a public fund. 

Kurt Andersen: You remind me, too, of what I didn't know until reading you, that Apple, Steve Jobs, 1978, just about to break through, gets a half million dollar Small Business Administration, guaranteed loan.

Mariana Mazzucato: Yeah which at the time was a lot. Now, it doesn't sound like that much given all…

Kurt Andersen: But still, what do we get for it?

Mariana Mazzucato: Yeah, it's the seed money. It's the seed money. And, you know, so, you know, coming back, as you briefly mentioned it to the Tesla example, everyone knows about Solyndra, because Solyndra failed and it became another narrative like the Concorde plane of, you know, government being rubbish, not knowing how to invest. Well, that same portfolio of investment that Obama had, because you have to remember that after the financial crisis in the U.S., unlike in Europe where we just did all the austerity, the the US government under Obama decided that the stimulus post financial crisis, at least initially, they decided, this was going to try to be green. So first of all, that was a real ambition. That's what got him to actually attract someone like Steve Chu, a Nobel Prize winning physicist, to want to come in and direct the Department of Energy, so you have a Nobel Prize winner being a civil servant, you know, directing a department. He then set up ARPA-E, which is equivalent of DARPA but in the Department of Energy, much, you know, lower budget, but still very ambitious. And they started to invest in different types of companies with DOE loans, guaranteed loans as different as Solyndra and Tesla. So Tesla got four hundred and sixty five million, Solyndra got five hundred million. Solyndra goes bust. Taxpayer has to bail them out. Tesla obviously does well. And what did they do with that? The argument in the Obama administration was if you don't pay back the loan, we want three million shares in your company. Now, that makes no sense to me. Why would you want three million shares in a crappy company that doesn't pay back the loan? The company did pay back the loan because it's an innovative company. In 2013, the price per share during that time, 2009, 2013 went from nine to ninety. Had they said we get three million shares if you do well, that difference nine and ninety multiplied by three million would have more than paid back the Solyndra loss and the next round of investment. So that's what I mean by being like a public venture capitalist. In that case, it's through equity stakes. But in other cases, that kind of public return can be again on the conditionality that profits are reinvested, prices of drugs, IPR patents not being abused, you know, so forth. 

Kurt Andersen: So, so governments have to lose their civil servant inferiority.

Mariana Mazzucato: Exactly.

Kurt Andersen: That has been reinforced over the last 40 years. 

Mariana Mazzucato: They need psychotherapy. 

Kurt Andersen: You refer in one of your books to the government latching on to unrealistic panaceas technologically like artificial intelligence. Is it doing that? And do you think AI as a key to future bounty and happiness is overhyped? 

Mariana Mazzucato: No, I mean, I think AI is the new kind of general purpose technology. So a technology that can impact, you know, production, distribution, consumption all across the economy. But in that sense it’s not a sector in and of itself and it's not a mission in and of itself. It's an input into basically probably everything we do. But again, we have to govern that process. You know, so many people say robots are taking our jobs. It's actually not true. Robots, mechanization, industrialization, and, you know, the equivalent of AI a long time ago has always been labor displacing. But what you had was that the profits being generated were being reinvested back into the economy. So David Ricardo, who I've already mentioned in 1821, wrote the first ever economics textbook, Principles of Political Economy and Taxation. Chapter thirty one was called “On Machinery.”  And he worried about, you know, that machinery was taking jobs. But what you then had for 200 years was that process of reinvestment, new jobs, new sectors, new industries appeared as soon as corporate governance -- and this is 1980s -- changes completely to be fully just focused on maximizing shareholder value, that process of reinvestment gets blocked. And that leads to the financialization of business, financialization of the financial sector and that's what causes huge amounts of damage and creates a kind of inequality that we're seeing today. So, you know, part of the way to govern AI is also to be very clear and vigilant on what's happening to the profits in the sector, as well as how the decisions are being made on the uses. That comes back to the, you know, Google searching you for free, point. So these are all different dimensions of how do you govern a system for the public good as opposed to obsessing on the technology. 

Kurt Andersen: Although mightent this be different than the previous industrial revolutions? Mighten this be the, as Keynes said, the economic problem finally being solved and they're just not being enough good jobs that need to be done that the robots aren't doing, and therefore we have to figure out a way to share the bounty without necessarily having it be job based? 

Mariana Mazzucato: So maybe? And that's part of the reasoning behind universal basic income to make sure that everyone, regardless of what job or if they have a job, has some sort of, you know, floor below, which they don't go. I don't like, by the way, the narrative of the UBI again, because I think it's it seems like a handout, whereas if we call it a citizens share a citizen's dividend, it can still be the same amount of money, same form. But call it your share of you know...

Kurt Andersen: Like we do in Alaska. 

Mariana Mazzucato: Yeah, exactly. Very good. On the other hand, if we go back to the kind of climate related missions that we were talking about before, there's all sorts of new skills, new services, new jobs, new sectors that might come from that. So the example I often give is Denmark, you know, tiny country compared to the kind of countries we've been talking about. Denmark today is the number one provider of high tech digital services, the whole service sector to China's green economy, basically.  And China already some years ago, I think it was four years ago, announced a two trillion dollar plan over the next five years to basically invest in greening their entire economy, including, you know, old style manufacturing. And Denmark is servicing that. And that's new jobs, new services, startups. So the startups in Copenhagen they are servicing, you know, a green revolution in China. And that's where this whole notion of purpose and missions and stakeholder value, but making sure that government is really pushing the frontier. And as you said in the beginning, steering but not micromanaging, that can lead to all sorts of great things, but not if you see your role is just fixing market failures or handing out subsidies, guarantees, condition-free bailout programs during Covid-19. 

Kurt Andersen: So looking forward, let's say 20 years, what are you most hopeful about technologically if we get the management guidance, collective decision making about it correct. Where should we be most hopeful? 

Mariana Mazzucato:  What currently is making me hopeful, to be honest, is something a bit different from how you phrase the question. But let me know if this is still answering your question, which is youth. You know, if you think of Fridays for the Future, where kids all over the world, you know, starting with Gretta Thunberg, but it just became a huge wave, really cared about and care, sorry, about climate change and boycotted their schools because of that.  Or the, you know, Black Lives Matter, the MeToo movement. There's something about social movements today coming back very much at the center stage and young people, you know, teenagers really caring about these issues. And I think the reason this is so important is that we shouldn't forget that coming back to the capitalism versus feudalism, what has made capitalism better has been not just these kind of government investments that I've talked about in terms of, you know, solving lots of big problems with public money, but also social movements that made sure that along the way, the kind of capitalism that we have is a bit less barbaric than than what it was. So, you know, we have weekends, not bad Saturdays and Sundays. We have the eight-hour workday. We don't have children working in factories because the labor movement fought for that. People died for that. So the fact that we have young people today fighting the climate battle and telling, you know, the previous generation that they were completely rubbish, we should also ask ourselves: What would that look like in the data space, the digital platforms? Imagine if young people started to really mobilize and become active and caring also about how their own data was being used and abused and being a force for good to make sure that innovation is being shaped and created in a particular way, as opposed to it at best being a discussion between the state and business. And that, you know, that level of activity which again, come back to the Fridays for the Future movement makes me very hopeful. And I do hope it starts to spill over into the data domain. 

Kurt Andersen: So so the technology, qua technology will take care of itself and and is there for the plucking to make life better or richer longer, but we just have to get the various social cultural systems in place to make sure we all share. Is that a fair summing up? 

Mariana Mazzucato: No, no, no. The social movements have been part of the progress itself. They haven't just like I said, regulation should just be about making sure that a particular market or sector is more fair. It has to start with its idea about creation because public investment is so crucial, making sure that you get not just a public return, but also shape that innovation in a particular way. The same thing with social movements. People, citizens or, you know, co-creators themselves, and the fact that in the past a lot of the innovation itself came about because it was pushed to improve. Think of the environmental movement. Without the environmental movement, in some ways we wouldn't have renewable energy. Think of the Green Party and the Green Movement in Germany. It's not a coincidence, actually, that Germany is one of the few countries that very much has had an energiewende kind of mission at the top, which isn't perfect. I know there's problems with it, but it came about because there has been a long history of debate and discussion in Germany that this is the way that Germany has to go. And so a movement that made it much more fertile, if you want, for a party, but also for Angela Merkel to be much more ambitious than she probably would have been. And by doing that, you now have, for example, coming back to the conditionality I was talking about before, when the steel sector in Germany asked for a loan by the German government, the German government, because it had this kind of, you know, green transition strategy at the top, made sure that the loan was conditional on steel lowering its material content, which it did through repurpose, reuse, recycle technology through its whole value chain, not because it went to the World Economic Forum in Davos and talked about purpose, but because they had to in order to get one penny of public money. And so they did that through innovation and investment. That produces a certain type of growth, that produces a certain kind of services and a certain type of steel, which is today the greenest, most innovative steel sector in the world is in Germany because of that.

Kurt Andersen: So the future we get is, is this is the development of technology and how it's used are inextricable. You can't really talk about them one over here and one over there. 

Mariana Mazzucato: Absolutely. Good summary. 

Kurt Andersen: Doing my best. This has been a pleasure. Thank you so much.

Mariana Mazzucato: Thank you so much. It's been great. 

Kurt Andersen: The World as You’ll Know It is brought to you by Aventine, a non-profit research institute creating and sharing work that explores how today’s decisions could affect the future. The views expressed don’t necessarily represent those of Aventine, its employees or affiliates.

Danielle Mattoon is the Editorial Director of Aventine. The World As You’ll Know It is produced in partnership with Pineapple Street Studios.