Innovation in Sustainable Societies

Roberto Peccei UCLA and Club of Rome

Innovation in Sustainable Societies
• The Role of Universities in Innovation • Patterns of Innovation • Innovation for Sustainability - Energy challenges - Economics challenges

The Role of Universities in Innovation
• If you analyze regions in the US which have become engines of economic development, they have two characteristics in common: i. They all had, at the beginning, available land that could be developed or redeveloped ii. One or more research universities were easily accessible in the region and could act as innovation catalysts

• Some examples include: Silicon Valley: Stanford, UCB and UCSF Research Triangle: Duke, UNC and NC State Route 128: Harvard and MIT San Diego Corridor: UCSD • Will focus on the California examples, because I know these best, but similar lessons can be gleaned also elsewhere (and not only in the US) • California universities are at the forefront in the world [Figure] and have been the engines that have helped drive its economy. Their role is two-fold: i. They are the source of continuous innovation ii. They help prepare a technically competent workforce

• What have been the important characteristics which have helped California’s universities become innovation engines? i. They have been the beneficiary of a long period of enlightened public and private financial support [well directed investment] ii. They have both being able to attract great scholars to their midst [ success begets success] as well as grow their own [nurture the young] iii. They operate guided by a brutal, but effective, meritocracy, which encourages students , postdocs and faculty to pursue their ideas in total freedom [merit and equality are paramount]

• Two other external factors have been important to make California universities engines for innovation; i. The 1980 Bayh Dole Act requires universities to “transfer out” inventions developed as a result of Federal funding. California, with 10% of population receives 15% of Federal funds, so it transfers out more inventions than other States ii. Through the years an entrepreneurial ecology has grown around California universities, where it is natural for venture capital managers to be on campuses and where student and postdocs are treated as equals to professors in regards to royalties from inventions

• There are two other important points to note : i. Although almost all the companies created in California can trace their origins back to one of the campuses in the State, only a small fraction of these companies were started through the Tech Transfer offices in universities. Most companies developed from ideas which matured later on (e.g. Cisco, Google) Nevertheless, the ties to the campuses remain strong and universities benefit from the significant “philanthropic reinvestment” they receive from grateful entrepreneurs. In Silicon Valley this is known as a virtuous circle

ii. A second ingredient which has been essential to foster California’s entrepreneurial atmosphere and which has been a key to its success is the acceptance of failure. One cannot really push truly novel ideas forward unless one is prepared to accept the possibility of failure. Fear of failure is often a real hindrance to success. A truism of California is that, although you will be acclaimed for your successes, nobody will really care, or will punish you, for your failures. Indeed, in certain VC circles, if you never “flamed out” in one of your commercial endeavors you might be looked upon with some degree of apprehension!

Patterns of Innovation
• Major breakthroughs, which start whole new industries (ICT; Biotech; Nanotech; Social Media: etc) have characteristic patterns • One of the most useful indicators is the publication pattern of leaders in a given field (stars) and the frequency of start-ups • There is an interesting time lag between when leading scientists (stars), new companies, and other scientists (collaborators) enter into the field • Typically Δt ≈ 2 years, but there is always a very slow start-up period τstart > 10 years [ Figure]

Zucker, Darby and Brewer

Example of the rapid growth of the US Biotech enterprise

• These innovation patterns raise interesting questions: i. Is there a way to shorten τstart ? ii. When is a “new industry” established? iii. Can “new industries” grow out of “old industries”, or must “old industries” die off? [Contrast lifetimes of cities with that of companies] iv. Is there a way to jump start this process by government investment? [ Record is mixed when investment is targeted (e.g. War on Cancer in US), but much better if investment is broad-based (e.g. BRIC countries)]

Innovation for Sustainability
• In my view, there are two different types of challenges which we need to overcome to build a sustainable society in the future: - Physical challenges (energy supply; conservation of natural resources, food security, etc.) - Social challenges (peace, elimination of poverty, sustainable economies, etc.) • We will need many innovative ideas for both types of challenges to make any progress towards sustainability • Will illustrate this briefly with examples from energy and economics

Energy Challenges
• Worldwide we consume about 550 ExaJoules (EJ) (1018 Joules) of energy per year and it is likely we will consume 1000 EJ= 1 ZettaJoule in 2050 • About 85% of this energy comes from fossil fuels (oil, natural gas and coal) • The challenges we face are twofold: i. We still must find more energy in the future (even after having increased energy consumption by a factor of 30 in 200 years!) ii. We need to change the energy mix towards renewables, to prevent CO2 build-up

• Both challenges are formidable

• Innovation in renewable energy is ongoing worldwide, but still in early phase of growth

• Projections from EIA for renewables are in 150 EJ range for 2050 rather than in desired 500 EJ range

• Very difficult to see how to ameliorate the situation: i. Much basic research still needs to be done [e.g. efficient thin-film photovoltaics; 3rd generation biofuels, etc] and there appears to be no “silver bullet” in the energy front ii. Still relatively small government investment across the globe, distributed along different technologies [US: research $ energy/health < 1/5 ] iii. Energy companies are not investing enough in renewable energy opportunities [ “new industries” do not grow out of “old industries”] • Proper carbon tax, with funds directed towards energy research, would be of great help

Economics Challenges
• It can be argued that present market driven economics is ill suited for a society which aspires to be sustainable • Focus on growth and consumption, resulting from unconstrained market forces, drives society towards an unsustainable economy, where natural capital is consumed at a greater than replacement rate • By treating the value of natural capital and the costs to society of workforce reductions as externalities, the present economic paradigm distorts societal values

• Including externalities, often what is judged by the market as “economic growth”, in reality is “uneconomic” • What is needed for a sustainable society is a new people centric economic paradigm whose goal is the preservation of the commons rather than the enrichment of a few. • The task at hand here is also formidable and requires much innovation - Can one devise a coherent and consistent economics of sustainability? - If so, given the vested interests in the old market economics, how does one begin in society to effect a transition to this new economics of sustainability?

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