I was talking to someone recently that argued that government grants to private companies were the most effective grants because the companies had proven methods to commercialize innovation. The person cited government funding for Tesla, but I can find little evidence of government cash as opposed to incentives going to Tesla.
This Tesla example reminds me of a big difference now at the beginning of the Fourth Industrial Revolution compared to the Third Industrial Revolution that began in the 1960s with the advent of computing and digital information. In the 1960s government funding was plentiful at top universities like MIT and for government agencies like NASA. This investment lead to new technologies such as computer networks, microwave and advanced materials which were widely adopted. Eventually the resultant creation of economic and social benefit reached unheard of levels of prosperity.
The situation today is one where government funding, in limited amounts, is made available for basic research at universities. Little money is available for applied research and agencies like NASA have been greatly reduced for many years. If we think about when a startup needs money, the answer is in the early stage when it cannot easily access capital markets. If we look at an Industrial Revolution, again the capital is needed in the earliest stages to fund the primary innovations.
What might save the Fourth Industrial Revolution from a lack of government funding is that so much innovation surrounds data, information and technology (like the Blockchain) that does not require huge amounts of funding. Now generally I favor limited government and a commercial playing field not disrupted by government. However, government funding for significant basic and applied research makes sense to me, particularly given the declining spending on research by corporates. The corporates with the best ROI still invest in research according to HBR. Almost all the other corporates choose to enrich management or shareholders rather than invest in research.
The views expressed herein are my personal views and do not reflect the views of any organization that I might represent.
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