Steve Jobs is just one example of the startup mythology that surrounds Silicon Valley–we credit the private sector for the innovation and growth in our economy. But University of Sussex economist Mariana Mazzucato’s book The Entrepreneurial State: Debunking Public vs. Private Sector Myths argues that it is the government, not venture capitalists and tech visionaries, that is the hero. “Every major technological change in recent years traces most of its funding back to the state,” says Mazzucato. Even early-stage private-sector VCs come in after the big breakthroughs have been made.
The book recounts how the parts of the smartphone that make it smart–GPS, touchscreens, the Internet–were advanced by the Defense Department. Tesla’s batteries came out of a Department of Energy grant. Google’s search algorithm was boosted by a National Science Foundation innovation. Many new drugs have come out of NIH research.
How much the private sector owes to government will be a hot-button issue in 2016. But Mazzucato says there’s a better model: Israel and Finland retain equity in firms that come out of basic government research. And the U.S. government in the past has dictated that companies reinvest money in Main Street rather than give it to Wall Street. That’s how Bell Labs was born, after the federal government pressured AT&T to reinvest profits in innovation. We got the C++ programming language and cell-phone calling technology, among many other advances, out of that. Not a bad precedent.