Innovation Economics: The Pie Must Get Bigger

With $250 billion in endowment and a group of the most accomplished individuals on the planet, research universities have no choice but to gear up to attack the world's biggest problems and provide a jump start to getting the pie growing.
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If you work long enough, even in high growth businesses or organizations, the inevitable bump in the road comes along, and sometimes that bump is more like a pot-hole or a ditch. When the pie is getting smaller, no one is happy. This axiom applies equally to companies, institutions, governments and world economies, and the ultimate remedy is almost always the same as well. As painful as it may be, investing in innovation is what will get the pie growing again.

When a company is forced to shrink, employees worry about their jobs and the shrinking value of their stock options, bankers worry about being repaid, investors worry about the value of their stock or having to invest more capital to keep the enterprise afloat. The leaders of the company worry about retaining talent and maintaining morale within a sea of seemingly unending bad news.

A similar story results within institutional settings. When funding and other sources of revenue go down, employees get nervous, board members get aggressive in searching for cost reductions, donors become less enthusiastic, and leaders have a hard time generating enthusiasm for the mission.

Unfortunately, entire countries are susceptible to the same phenomenon. When times get bad and the pie starts shrinking, citizens get nervous about their jobs and their future, and all of life appears to be a "zero-sum" game. If someone else gets something, it must be coming from my pie. This totally understandable mentality results in rage over virtually any government spending, a conviction that immigrants are taking good jobs from citizens who need them, a reluctance to invest personally or through tax dollars, and romanticizing the past even if, by any objective standard, it can't be replicated.

When faced with a shrinking pie, all leaders are faced with a similar calculus: how to focus inadequate resources (when a pie is shrinking resources are always inadequate) to get the pie growing again. In a commercial setting this may mean closing less productive divisions, product lines and assets while at the same time investing in opportunities that will result in future growth. Institutions go through the same process as they seek to reinvent themselves during tough times. Governments have the most difficult time of it because in some sense every citizen is a shareholder or board member, and decisions are made by a majority vote. Change is never popular, and future investments cannot be completely evaluated until after they have been made, so the natural tendency is to avoid bold initiatives even when they are desperately needed.

The precise measures required to get the pie growing again are always subject to serious debate. Ultimately, the question is what targeted investments will spur the sustainable growth needed to refocus the company, institution or country on opportunity as opposed to fear.

Holden Thorp and I suggest in our new book launching today that research universities can and must be a source of innovation that gets the pie growing again. In Engines of Innovation--The Entrepreneurial University in the Twenty-First Century, we suggest that with $250 billion in endowment and a group of the most accomplished individuals on the planet, research universities have no choice but to gear up to attack the world's biggest problems and, in the process, provide a jump start to the process of getting the pie growing again. Our hope is the book will foster a national conversation on maximizing the impact of the work going on in our elite institutions of higher education. To that end we've also launched a website, designed to pick up where the book leaves off. Have a look and let us know what you think.

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