Class 2, Part 2: Innovation Systems and Direct/Indirect Elements in the Innovation Ecosystem

the following content is provided under a Creative Commons license your support will help MIT OpenCourseWare continue to offer high quality educational resources for free to make a donation or to view additional materials from hundreds of MIT courses visit MIT opencourseware at I'm just gonna go very quickly through the World Economic Forum I basically I only wanted you to all to glance at this and get an idea of it because what it's in here for is to show that you know we're not the only ones trying to think about innovation factors right they are trying to figure out what these factors are as they assess different national economies they have a whole compel competitiveness rating system which they get out every other year so in 2015 2016 as you saw Switzerland was number one Singapore number two in the US was number three in their rating and then they have a whole series of elements that they consider in their global competitiveness analysis so they look at what they call factor driven economies and the pillars there are institutions and infrastructure and macroeconomic environment and you know in in actually early stage education as a pillar and health and then efficiency driven economies they call them that's higher education that's market efficiency for goods that's labor market efficiency that's financial market developments technology readiness and so forth and then innovation driven economies business sophistication and innovation capability so they have a very different mix here I just wanted to throw in kind of a comparative way of other people looking at the problems that we're talking about and the kind of pillars that they come about and how they sort different kind of world economies and organize them but a lot of these factors we've just been we've just been talking about kind of the core I think of what to take what the takeaway is from from this study and let me get you also had Rycroft Lilly as well right so why don't I get Rycroft out on the table – that's Bob Rycroft and and cash they did this piece back in 1999 and I'm leading into how do you look at some of these more indirect innovation factors right because they they remain important and we're just gonna pick three right and you know they're looking at a kind of an element of innovation organization which i think is a core factor but they're talking about kind of a sub piece of it this kind of networking theory of innovation organization I think it's it's an intriguing piece they argue that we are now at a stage in the world economy that complex technologies drive the economy so with complex technologies the lone inventor and the garage working solo that's a myth that doesn't work anymore right because the context that lead to innovation are just too complex they argue so that means that the traditional focus of us technology policy on R&D at particular institutions and in open markets that's that's not only right anymore they argue so they say that a much more self-conscious networked learning environment is actually key and what does that mean well complex technologies we know dominate world exports 82% of 1995 compared to you know 43 percent in 1970 the rise in complex products means a rise in complex organizational models that goes with it the number of corporate alliances corporate in relationships the connectedness of the actors becomes all that much more critical when the dominant products are complex technology-based so as product complexity grows the need for innovative networks grows and technological process progress in this phase really requires that network learning integrating and applying a whole wide variety of new science and technology knowledge and know-how that now becomes key gee-whiz you know we're not organized around that there these guys are right we've got an innovation system that's organized I'm on our much earlier idea of how technologies evolve it doesn't necessarily reflect the reality of the complexity and the fact that the complexity dries much more complex organizational system which includes networking they argue so they they cite George Brown who is a great former chairman of the House Science Committee on the point that neglects of the processes of knowledge and their diffusion and application needs to be a core concern of the innovation system and Brown is talking about particularly at the governmental level the governmental kind of role here there's new kinds of learning that need to take place and need to be organized around if you're going to have this kind of learning network system so a shared network learning which cuts across a series of institutions institutional engineering that brings in other parts of the systems like the regulatory side into the network there's got to be a whole evaluation and what they call Co evaluation between complex organizations and the technologies that they're developing so learning by doing learning by using learning from scientific and technology advances learning from spillover is learning from interaction they argue that these are whole new features of learning they need to occur that honestly accounted for our current learning systems so they need to be changed to really accommodate the kind of new realities of the way in which innovation is going to have to get organized so that's their that's their proposition I thought it was just kind of a fun read it tells us a little more about the determinism piece that we were talking about earlier complex technologies demand new organizational models and if Nelson is right innovation organization really amounts to a core direct innovation factor then you know stuff like what Rycroft and cash are proposing you know become significant Lily it's all yours that was yeah I'm gonna I'm gonna go high-speed for the rest of the class and actually in the United States we're experiencing the lowest unemployment rate since 2008 however little economies are projected slower and so that sort of brought me to a question there was a question for you as well which is why is it not enough or is it enough for growth rates to be positive and slow and steady so what's what is the magic thing that happens between a corporative about where we yeah run to and about three percent which seems to be more about an optimistic atmosphere and do we need to maybe host for the next 50 years post 2008 crisis little building the economy struggling do we need to readjust ourselves to adapt we should be trying to push further and try to keep our growth when I was reading and I was I felt like well maybe that extremely high growth rate so at least from what I see maybe we should just so I kind of stay on that so let me take that on for a minute because if technological and related innovation is the dominant cause it affect your growth and your societal well-being depends upon your ability to have that growth and to spread that well bring across the society then if we're stuck at a one at a 1.8 two percent growth rate isn't that gonna be an enduring disruptive problem in the society are we gonna be a lot better off if we could push that up to three well if we've got a deep problem of economic income inequality at this point an economic growth rate helps a lot in dealing with that it's much more problematic to deal with that with a low growth rate for example so this kind of barbell effect that we've got in the Society of a growing up the middle class and then a thinning middle and a growing lower end services lower paid services sector which the middle is being pushed into it's a lot harder to fix that unless you've got a stronger growth rate I'd argue I understand your point how much stuff do we really need right you know how many things do we actually have to have right is there a whole new way of kind of organizing the society so you're making an interesting underlying point I think max um competitive Pisa we're supposed to be beating or you know other countries see ourselves leaders we're not the ones to do the discovery around in Turkey or whatever and the gains are substantial a first mover advantage is substantial but I guess I would say but it's a good question of like how much do you really need to consume perhaps it's not necessarily the 1.8 percent that's the problem it's the one-two punch of sort of the dot-com our our technological wave or bubble bursting and we ran immediately after that having also Francis that's compounded each other but one of your points from brought up another question if someone made and that is what do do we have we identify either within the United States or internationally what would be our next innovative wave and is it the same for the United States as as it is for the rest of the world or how we unite identified it early that's what I do the human genome project was over 10 years of cost but there's a lot like yeah you know something like for example the light bulb actually figured out the left it's a beautiful label but then on top of that there was only infrastructure and moving over a key that technology that really stole over so Lily why don't we go to rock Crofton cash I just want attention so one was how do you start the proper balance or can identify proper balance between encouraging competitive are indeed inside a single industry or field ending or encouraging this collective learning that for a carbon capture is so important and I also had so my question is is it possible to foster networking and shared learning while protecting the profits and patents so you don't see that biotech like IP battle over the Chris Berg nine technology that's huge because there's so many different companies like five or six being spawned out of these core ideas and these like IP technology is that their licensing from essentially two different entities and like whether whoever gets those price they have to pay me to so I think it makes sense like yeah for the how to share knowledge on a more mature level but for you know early technology the early companies it's hard to say because you know you're still trying to protect your market share I'm Germany another just to add a point to this IP point that you all have been raising so in our panoply of direct and indirect innovation factors this whole world of intellectual property rights is indirect but we can all see how potentially significant it could be in other words it's not going to fundamentally affect your ability to undertake the innovation itself but it sure may affect your ability to realize gains off of it Oh guys a quick question about the dimensions of the advantage of a first and so in the Nelson you say that the first person necessarily yeah and I just me and do it in really something like energy where maybe the first person and you're setting up a bunch of urea plant and get stuck with outdated I man I agree with you I think the distinction here and I probably should have been more explicit but the first mover advantage in launching an innovation wave in other words a national or regional advantage for the benefit imme I think it's very real I think you know the point you made that the first mover advantage for a particular firm may be much more questionable others may see what they're doing and be able to make improvements and bring those out more rapidly than the initial firm it's kind of locked in to its initial approach and we see we see in many cases with new inventions that bring on innovation advances we can certainly see firms that have a first mover advantage we can also see second movers that are able to capture that so I think it's a more complex question at the company level but I think it's clearer at the regional economy national economy kind of level so I would argue that the US by building strong innovation capacity and its ability to lead most of the innovation waves of the second half of the 20th century that was a huge advantage that was a huge gain so no sooner did the u.s. miss the quality manufacturing wave to Japan seventies and eighties but it came right back with the IT innovation wave in the 90s which Japan missed so when you put your economy at the edge of the frontier right leadership of the frontier capturing those innovation ways becomes pretty important but I digress Lily why don't you give us a closing thought why don't you give us a closing thought on Rycroft in cash it was all this learning-by-doing was a little too squishy yeah right you need a more exact portrait got it okay well I think that's a valid critique all right so I'm gonna race through the next couple which Martina I think you've got this is Egil's mills burg and i'm not gonna spend a lot of time on it but again it's one of these indirect factors that turns out to you know have some significance here his point is the old economy was a world of tangible assets what counted were your plant your equipment your land your physical resources your product inventory your infrastructure support system physical stuff in the 21st century of a new economy intellectual and intangible assets those are key right so we have a wonderful 19th century accounting system it's really it's wonderful it can really value the old economy it really can value the new economy right and we we've been discussing this whole problem with the ability to get capital on the advances if you've got an accounting system that can't value true value in the new economy then of course you're gonna have a serious problem getting capital funding available right so here's an indirect thing you know the accounting system that turns out to have a fairly significant effect so the inability to measure intangible undermines the willingness of firms to invest in innovation because they can't really score it and get gains from it and it limits the investment flow into innovation as a result so any argues paints a picture of how this intangible process you know came about and arguing that by the late 90s there was a looking at the US economy overall that was about one point one trillion invest in intangible assets in the manufacturing sector in that same sector there was a trillion dollars in combined in R&D business processes and software more much more in tangible and intangible capital he argues became eighty-two percent of US firms market value just an overwhelming portion of their market value so we need new metrics for how firms invest in these qualitative innovation factors so that we can drive investment in efficient way into the right places and we just don't have them we only measure a couple of things we measure total company R&D investment that gets reported on you know quarterly reports and we get company patent filings that gets revealed as well but then all this other stuff and maybe these aren't the right factors maybe some number completely wrong but there's a whole set of other potential measures we don't even ask for right or even think about how they could be best organized so that's Eagles you know core idea here you know that's why you need to get some of these indirect innovation factors right along with the direct ones another example this was you know Judy Anne's Gupta's early book on venture capital right kind of an early history of venture capital came out in 2000 venture capital by 1999 had grown from three by going from three billion at the beginning of the decade to thirty billion now venture capital in 2015 was sixty billion okay so venture capital was built on the idea that introducing new technologies to live is much higher investor returns remember that chart that one of you cleverly asked me how many years it covered was that that was Martine you know this is he's saying the same thing in other words if you can capture the gains of radical investment they can be really big and that's what the venture capital sector is organized around and he notes this interesting history right so we're in one of the capitals of venture capital we're in the place that rigea nated it the east coast model originally was much more focused on what we would call today financial engineer you know tax benefits short-term returns that conceptual framework kind of dominated the early boston venture capital model the west coast developed a very different model around science and technology driven growth in places like Sandia Road in Silicon Valley it's still its capital so now those distinctions are pretty much disappeared both sides are on the same game and you include within the term of venture capital some people include a much broader phraseology including angel investors corporate and corporate venture firms foundation venture firms sometimes University endowment funds that go to them to a venture kind of purpose so it's a bigger landscape than it was you know at the early stages but the eastcoast model which did things like late stage buyouts turnarounds roll ups consolidations in addition to early-stage venture that's now prevalent frankly in both the East Coast and West Coast models so the two sides have kind of merged the originator of the venture capital idea was General George Daurio who was war ii general helped in the organization of industry in europe during what we're – and following it so a remarkable figure he taught at the Harvard Business School but he's the one who kind of saw this potential gain from innovation based growth and the West Coast model really was kind of a maverick model it was very high risk investment based on quite unproven technologies and that turned out to be the right model right the problem is we're not frankly doing enough of that in enough areas we'll get to that in another point of class so that's the venture capital story and let me just close and then we'll have some dialogue that Martine will lead this is Charles Schultz who was you know quite a famous economist he was budget director for Lyndon Johnson and he for Jimmy Carter who's head of the Council of Economic Advisers very highly thought of economist Minnesota deep historical role in governmental policy making he's taking a look at the debate which will actually get into in our next class about what's going on with Japan's economy of the 70s and 80s where they're bringing on this new innovation wave of quality manufacturing and the u.s. is trying to figure out how to respond right and he's talking about the political debate much as we were talking about the political debate that's going on now he was talking about the current political bait of that time right when he writes this in 1983 and there was a big debate over u.s. competitiveness there was a deep concern that the u.s. was guess what D industrializing sound familiar that essential US heavy industry was in decline and the 80s concern was that the US may have been at the cutting edge of technology advanced but it was not implementing those technology advances whereas by comparison the US perception of the time was that they had a very activist governmental kind of role an interventionist government a kind of role that's identifying technological winners and moving those right into implementation so in a way Martine it's like that the point you were raising earlier don't just do sculptures do buildings Japan was deep into the building phase the US was still at the sculpture phase so and it's its principle arm for doing this was meaty and which is now called MIT but still very prevalent but much less interventionist now than it was back or considerably less interventionist now than it was back in the 70s and 80s what proposals are the parties coming up with on how to deal with us well here's what the Democrats were up to they decided there shall be an Industrial Development Bank it would just like in Japan pick winners and heaven forbid it would protect losers right so no one would have to lose jobs will be protected and so forth and yet they would also select you know winning new areas to get investment and it would work to rehab failing major industries upgrade them protect their workforces but also attempt on working on a new labor agreement between management and labor to get labor cost cuts that would help fund the restoration of these sectors that was the Democrats idea right the Republican idea was to you guessed it support reductions in marginal tax rates right Schultz is very concerned about this idea his concern is that the US government is not able to select a winning industrial structure this is just not a good job for government to be doing it will not be good at this the regional politics the state politics are just so powerful that it's going to unglue the government's ability to kind of pick a winning technology sector and ride with it it's gonna have to be dispersed everybody's gonna have to have gains jobs are gonna have to be located all over the place just not something that's going to be supported well that the political system really cannot efficiently choose between individual firms and particular regions for getting support at this stage of the industrial process so find a support Rd but when it comes closer much further down the pipeline and you're actually picking industrial winners that's a really tricky political he warns us about so a lot of this class is you all were driving us towards today is going to be what is the governmental role right so Schultz stands as a warning about the political imperfections of government the political difficulties of government in undertaking an interventionist role so it's I think that's probably a pretty good son we all skipped the rest of Schultz but that's that's really his core idea is to tell us a cautionary tale about what the government of role is gonna be that the sheer massive weight of politics is not going to necessarily drive optimal technology decision making now Martine let me turn it over to you and let's go through these three so first Eagles and then maybe do a couple of questions on that and say some points and then let's do gupti on the venture capital structure yeah let's let's have an overview and you know and we'll start with Mills Berg's and then go into a couple of questions most likely will determine the long term company most likely the company so these long term innovations on these things that are hard to measure and so couple questions that were left up order what innovation trends in sectors represent the most promising growth areas for DC next what can intensify the shift to long-term intrinsic value for short-term objectives is anybody also like if anybody has any think about particularly the old accounting system which is kind of I think I've been easy I guess it wasn't doing it but I think particularly I don't know Management Studies or kind of behavioral things that we can take a look at how these intentional seem like something like you know when you see it and so I don't know if there have been any efforts sustained or even accepted argued over to like start valuing these intangible things so rushing a very interesting point and there's been a significant amount of work in Britain actually to try and figure out measurement systems for these intangibles these kind of know-how based assets and then following from that work and the EU on trying to measure these interestingly we really haven't done much in the US on this as crucial as it is I think it's really important to have some sort of standardized way to measure this because otherwise it all comes down to like trust between companies and inventors and investors and companies will always have an incentive to oversee what their intangible assets are and in order to prove what whether they're being honest or not so there needs some sort of standardization process other and my clearly investing standpoint isn't the fact that like value valuing like intangibles and things like IP main reason why there could be like hidden values or kind of this pricing based on because not everyone has a good idea of these things that's how they can find it's sort of an edge based off like other companies that might not have to sink inside I feel like that might be one of the reasons why there hasn't been a push to kind of I don't know standardize how do you want to find those not only because especially like I think he brought up like customer satisfaction I do like really hard to be around a way to come up with a metric to say I feel like it'd be difficult but interesting that's also curious whether he's talking about a system that's applicable to companies of different industries they're just companies within like the same industry like are you looking at Dropbox and box or are you looking at like Dropbox and Facebook like should you can you actually prepare like a cross that was even like the same industry but across like applications then interesting question to that is why are we treating intellectual property for different industries the same and so why is it is really high tea like for a Facebook was very quick to capture value relatively to other industries versus like energy where they might take you years and years and then even to execute twenty years is a short timeframe because it might take you ten years so at times you kind of get started that's so maybe really biotech why aren't there longer intellectual property cycles for those districts so I mean in 20 years these general general remark but there is a pharmacy to go there Pam laws that will extend the life have either had to compensate when we talk about when we do a class on the life science health science kind of case study will get a lot will get deeply into this whole question about patent term and could you start to very patent term and to encourage small market drugs third world disease drugs which wouldn't ordinarily come about through the system where you're right martine we've got to capture a billion eight just in upfront in order to bring a drug to market sure and he had all these brilliant people who are the best in the nation and the old case work for him but he's a bad boss that all these great minds are under stress working for him so they there's called the traders eight be chose to leave him and goes and start their own company will be needed they wrote a letter to the sky called arthur la roque who's a Wall Street financier and they asked him that if he could get some thought to create their own company and they have this strong IP and the strong knowledge that the industry and the original without of those would get into a venture capital it really didn't speed up until the ninety revolution because originally venture capital was very much a longhorn cattle what happened is that you would invest money and we expected it to they really get a core capability they are able to reap profits for a long period of time will that change when the it can be a fast way of making a return and so adventure telephone become a lot like hedge funds took a lot more racing so pretty much the way a VC firm runs is they'll mate they they land around ten years the way they work is that they they focus on outliers and winning with outliers so pretty much each of us about I mean like whoa I'm just so they'll give us each legacy round but they only expect to have us to really become with a face book and they know that every single year there's probably only like ten combinations and they focus on these multiple hi patty Richards if you make less than 15 extra original investment as a senior conservative advocacy and there's still only like a couple decent ones and what they focus on one thing looks I'm doing now actually focus on helping you build out a team in that paper they actually talked about we look a lot of the technology but also the person because pretty much we're gonna help you grow this company like it's like yeah it's it's gonna be changing rapidly you have to change of the person during each phase of it and so this is a form of capital is become very popular if you look into the I think you have some of the numbers there for how much how much was raised in twenty fifteen sixty billion so there is kind of like a capital bubble and it's really illogical because you there's only ten truly invested at the same time though because it's a really great business or that way a lot of people putting in money and so couple questions from that era what innovation threatens that careers represent the most promising growth areas for years yeah I do Lily so you said that in the first round or like the younger couple years ago was more the expectation was or longer returns now we've been spoiled with the tech revolution and people want returns two years right here more or less like if you're a really great company you're gonna exit and can we see the head made you can they have funds that mix long term and short term is that what they're gonna have to do because you I see short term and this huge influx if we have excess capital now if you say they're leave X number of companies that really did it big in the short term we have excess capital all this as compared to previous years so do you think that pcs are going to have to start paying more attention to long term returns and is that a more sustainable business model for them so what's happened is it's not so much like beef seasoned terms of nature because they the way ABC phone works is that no money and they need to increase that capital so a lot of times they can't say oh well we're gonna much better it's gonna be net profitable but not in terms of money oh good for society that doesn't usually happen what ends up happening recently there's been a fund that's like that that was invested where the investor like Jack mahabhava energy and also they focus on having like it's pretty much like the reason I bring that up is because it looks like they're trying to make huge returns of the capital what they're doing is these people that is a mix of philanthropy and patience yeah yeah so related to that like therapy see friends that will only be liked by series a financier to be financing or mezzanine funds and their firms up what do we think since that I'm so at different stages and companies but then we do run into the upper limit where you have group like the engine number of funds especially in Silicon Valley that life just like so easy see now but are also like long/short equity funds like they're willing to weed out but also like in the short term thing around we're getting some returns that way so I think that might be a response to how like to address that problem with what to do it also just really early to tell because I guess the idea of these in there to go was like what so I guess we're probably not so I'm not according but like is it kind of hard to see out you know these phones are now just starting to pop up like past 15 like towards of 20 years and are we you know is it a little bit early for us to say maybe these might have more success or what success yeah yeah just to put a few numbers on the table so venture capital funding in 2015 was sixty billion venture capital funding before the Great Recession was about sixty billion as well so we're sort of back to that number but when you think about I mean after all right if growth is driven by technological and related innovation and you've got 19 I got a 19 trillion dollar economy say nationwide right it's sixty sixty billion dollars is nothing right that's not a lot of money to be banking on what our future growth is gonna be so you know I the issue I think Martine shrewdly raised was you know we're not on an innovation wave at the moment we're on the kind of scale up part of the IT wave it's not the 1990s anymore VC's really work amazingly when they're right on the cusp of an innovation wave and playing for that very rapid scale-up and growth so art rocks investments in Intel which really you're absolutely right martine did drive the creation of the west coast model you know that was just at the cusp of the IT wave and the vc firms really wrote it and we're not at on one of those ways at the moment so the VC model has gotten much more complicated because the number of firms they were actually going to carry the kind of rewards that typically in a scale up part of the raft fast scale a part of innovation wave is just slower things are slower we're waiting for the waves right and you know like surfers and it's I think the old model the Maverick model will come right back if we get onto one of these waves but you know as we've discussed these are typically 40 year long propositions and you can be in a long trough before a wave takes off so that's really the that's the fundamental question into this industry on the other hand maybe there's another way of looking at it right maybe the other way of looking at it is could use spur waves more rapidly and is the short term return model of venture capital a real barrier in our ability to stand up longer stronger more enduring innovation ways sooner right so there's a couple of ways of looking at this that you know that I think are intriguing and we're gonna we're gonna take a dive into venture capital later in the class kind of looking a little more detail to it as you suggested Matt about the engine it's one of my favorite quotes Martine I was going to use it to enough water we're not focusing on resources and resource and we'll end up happening is we have IT ways but now we are you doing more business right and so his point of view is more that we we have better things in some sense but it's just really big times and that might actually be a huge opportunity because if you know 50 90 billion dollars of the capital or focusing on these can your impact and you're one of the investors is okay always 10 more years the big thing to is we're talking about entrepreneurs how the first the the first inventor usually didn't capture that value this is actually an opportunity for maybe the first inventor to capture on a value and then people focus on that being punning the first way the major again the drawback of that too is that say somebody this room somebody could see the technology braids 1 million three million dollars scale there's something valuable is a person venice versus facebook was the may be that that divide between the first hyper rapid effects right so you're driving us I think to important point Martine about the venture capital sector as its organized now right it's really organized for this right that's what it wants right it doesn't know what to do with this right and it's desperately trying to make this look like this right that's kind of where we are there's a problem with his model right it's not it's not there and so just as we critique the Merrill Lynch piece for you know the gap here in a longer-term patient capital it turns out that the VC model isn't really helping us where we really need a lot of help which is more in this kind of territory right yeah so I'm Martha was pushing us and Martine you mentioned it as well this whole gates is organized this new group that wants to deal with exactly this problem they want to start dealing with some of this stuff not just trying to focus on this right in order to get an energy innovation wave going so that may be big enough to be a different model I don't know it's not 60 billion and it's a long way away from it but he is shaking down people with a lot of money yeah it's fine as long as all we want is software and biotech it's great right it's great it's fabulous and some services sectors media and entertainment are good too right but if the society wants some other stuff right then we got a serious problem on the energy solution for the world right because energy is a huge loser in the current venture capital mark yeah they're more like institutions now like there's only really pod that matter like so yeah they're comically MIT and Harvard subway there's really like if you're at all so if you're getting investment you want from one of the top ones because you have to get multiple rounds of funding so if you get the first round an investor it's gonna get so much in the future but another thing too is that Silicon Valley which is the cool thing is like they've come up with all these ideas of how to like stretch routine to make innovation and how they focus a lot on disruptive business models so it might be interesting is if somebody right now we can say that there are a lot like the early telegraph line I think talk like fusion startups right now well you probably know even why comment there is only two years down all right so I'm gonna push us to do a few why don't you give us a few comments on Schultz and we'll close out the session when they're not really there inherently that's not their nature they've done better what opening point is that economies have done better when the government needs a supportive role I mean he does talk about a lot about Japan I think another factor to consider for Japan and also South Korea because I don't think that is that their population periods were in a certain way usually and that's why they kind of die off very quickly so that might be but so yeah is it this idea do we create the supportive environment or do we focus on industries I think it also might have been Ferguson in the last book in the last week's class about specific cities that focus is very interesting especially contrasting with this funny thinking wondering would he be writing I didn't look up any of his papers because he and I can think oh my gosh Schultz is the reason we have the president we have today telling everyone we're not the industrializing don't worry we're not the industrializing but we really weren't we and so all knowledge comes from freakanomics so we're not the industrializing or even if we are don't worry because the jobs are gonna be replaced by the technology that we're developing and so don't worry don't worry and we really let a lot of the industry here get away from us into other countries you know you raise a very interesting point Lily Schultz is writing in 1983 solo doesn't get the Nobel Prize until 1987 so growth economics doesn't we were talking in Beth and I were talking a bit a bit about this before class but growth economics doesn't really lock in until you know really we start to see what's happening in the 1990s that's when it's you can't ignore growth theory right you see it right in front of you so Schultz is out of in a ways out of classical economics he keeps pointing us to Japan success story being the national savings rate right so low says you know it's useful but that's not the driver right it's this technological related innovation so in a way you can see Schultz just as you suggest as a dialog within different stages of economics thinking right and Schultz in what in many ways is certainly in the neoclassical and early in a way earlier classical economics thinking about growth before new growth theory develops from people like solo and and and Romer so that's part of what he's saying here but I do think that his point about the difficulty of the political system to operate in a sophisticated technology realm I think that's very real right so every time we kind of and you know I'm guilty of this periodically every time we want to expand the governmental role and push it further down the pipeline Schultz always stands as a warning for me about the complexity of how the political process is going to wrestle with this and the system that the reward system in the political system is not the same reward system that technology stand up necessarily needs so Martina closing thought for us on Schultz good summary all right I want to thank our three discussion leaders for getting us off to such a good start good work team who set a model for us at a threshold I think now our classes participation is pretty well settle I think we've got a great size I think there's gonna be I can just tell from the discussion today it's gonna be terrific you guys are gonna be great and I think we had to have a lot of fun so um I had a good time last week but I'm really reassured about where this is going so thank you all for participating so I'll see you on the 28th and I will put out a longer term list of discussion leaders in the interim

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