A New Route to Science Innovation

Transcription

1 A New Route to Science Innovation Why we should rethink how to compensate, fund, and own scientific innovations. TANGIBLE OUTCOME MONEY How should this be done? Insights and ideas from a host of sources. Bradly Alicea Scientific Innovation Fellow Orthogonal Research bradly.alicea@ieee.org INTANGIBLE FEATURES

2 A gentle introduction Blog posts: Gobbledygook: Synthetic Daisies: Set of Articles (Nature): Nature Materials, 11 (April 2012): One-click Science Marketing, The M Word, The Scientific Marketplace. What does a market-based economy for science look like? * job market, competition for grants (supply-side economics). * tangible products (protocols, code, technologies), intellectual property (must these be privatized to be maximally beneficial?). What about intangible products? * barriers to entry (falling? Citizen science.), strategy (imitation, cooperation, competition?)

3 IP via Patent model: University Administration, Patent Attorneys Market RENT-SEEKING OR VALUE-ADDITION? Scientists, Engineers We own the technical expertise, but not the market power. The only route to compensating innovators? Is this innovation via rent-seeking? Rent-seeking: extracting value (in the form of rents) for access to patent space. Do we need a middleman to partition markets, or can we take smaller chunks with a higher overall payoff? Rent-seeking vs. value-addition: which is a better way to characterize this relationship?

4 % innovations with payoff Skewed towards tangible goods IP via Patent Model: Barrier to dividends: 1) significant proof-ofconcept required. 2) valuable components become proprietary. 3) pure science proceeds in fits-andstarts, tangential progress. PAYOFF PROMISE, LIMITED PAYOFF MORE WORK NEEDED, INTANGIBLE The Patent Problem Steven Levy, Wired Opinion, 11/13/2012. * patents are not only protection for ideas, but are assets (with intrinsic value) in and of themselves. * patent process is slow, difficult, and can potentially stifle further innovation. Role of patents: * True value creation (strategic partitioning of innovation space)? Barrier to dividend: amount of investment (effort, money) needed to yield return, additional value. * Largely rent-seeking (enclosure of innovation space)?

5 ALTERNATE MODEL: * raise money in increments (divide project into modules). * add value as discoveries are made (not a linear process). * modules and payoffs are specific to applications, market. EXAMPLE: moving from questions to findings and technologies Amount of work contributed by module #5 Open-source ethos: 1) offer some things free (knowledge, protocols). 2) market other things for a fee (templates, technology design). 3) MOOC model: offer webcasts of techniques to a wide audience (economy of scale). Added value contributed by module #5

6 What are the options? 1) commercialization * significant proof-of-concept required (must be novel but practical). * IP protection (proprietary), start-up potential. 2) open-source models * open to the public, versioning (drives development forward). * donation-driven, premium components (nonprofit foundation).

7 3) distributed fundraising What are the options? * existing sites: Kickstarter, SciFlies, IndieGoGo. Blog post: * funding window raise x amount of dollars in n months. * get paid as you go. 4) X-prize style challenges raise money (venture capital) and grand prize is competitive. * have fun, single winner -- end up with tangible set of tools going forward.

8 CROWDSOURCING: an inbred capital market? IDEAS! Social network member i 3, plus external funders (circle at lower right) Social network member i 6, plus external funders (circle at lower right) How much funding is raised within the social network (i ϵ N) versus from external sources?

9 Change the way we do business? Or simply adapt? Have both a pure and applied research strategy: * pure and applied research can potentially cross-fertilize each other. * what is the style of famous inventors? Edison Dyson Pasteur I have not failed, I ve just found 10,000 ways that won t work Enjoy failure and learn from it. You can never learn from success. There are no such things as applied sciences, only applications of science.

10 MODEL Prototype of alternative funding and investment model IDEA EXPERIMENT TEST INVESTMENT (crowdsourced) FURTHER INVESTMENT UNIT OF INVESTMENT From conception (idea) to production and potential for value-addition (testing) APPLICATION PROTOTYPING REAL-WORLD TESTING VIRTUAL (THEORETICAL) TESTING

11 Alternative Models of Value How do we define value? Do we need an economy of science? Other cultures: economic and intellectual (religious) worlds are joined at the hip. OUTCOME: religious activities had monetary (symbolic capital) value. Virtual Worlds (Second Life): Linden Dollars USD (1) LindeX currency exchange L$ (260) Self-contained Market Buy Land Sell Land Buy Clothing

12 Lesson from Shareholder Value Shareholder value: the point of a corporation is to create value for shareholders (investors), not to create a product per se. * what an entity does (e.g. product development) is ancillary to the value of its assets (usually specialized in one market niche, or as an expansionary entity). Down With Shareholder Value Joe Nocera, NYT, 8/10/2012. Theory of shareholder value * if you invest in a scientific enterprise (outside of a funding agency), what kinds of returns should you expect? * What kind of value can be generated through collaborations (Nash equilibrium version of a hostile takeover)?

13 Prediction Markets (a.k.a. Ideas Futures) InTrade, Iowa Prediction Markets, Hollywood Stock Exchange: EXAMPLE: Bets of Bitcoin Use virtual currency to make trades on events. Statement made on a real-world problem: Bitcoin will be exchanged for less than $13 USD at the end of December 31st, 2012 (over finite time window). * weighted bet: the earlier you place winning position, the higher your return. Price based on probability of event Take a position (yes/no) Pay market price YES = 90% chance of event occurring, $9.00 per security.

14 Research Strategy Be careful, this is NOT what is sounds like (nor a trick question). What questions do you ask? What kind of approaches do you pursue? * things that are similar to the community standard, or cutting-edge, out there questions? Do you compete with other labs, or collaborate closely? Are you an imitator (pure strategy), or an innovator (mixed strategy)? * some of these choices are a consequence of the scientific infrastructure (previous training, journal expectations, access to data and tools). Becomes an m-strategy (4), n-player (3) game, IMITATOR INNOVATOR COMPETE COLLABORATE x, y, z x, y, z x, y, z x, y, z

15 Production of Pens (cost/unit) What it enables (information/ value transformation) Production of Tablet PCs (cost/unit) What it enables (information/ value transformation) Educational/research Infrastructure (cost/unit) What it enables (information/ value transformation) MODEL OF INTANGIBLE VALUE (VALUE TRANSFORMATION) Value Transformation Transformity (energy and information) Anthropological Models of Value (defined by cultural change)

16 How do you make your research area robust (as a market)? Investment Bubbles: two examples Housing bubble = massive overvaluation of price per unit, unit is highly tangible (easy to assess true value). * bursting of bubble results in an unstable price trajectory (severe overshoot, undershoot in prices). Education bubble = massive increase in tuition rates, is this overvaluation (per unit)? Unit is highly intangible (harder to assess true value). * bursting of bubble results in a more robust price trajectory (some deflation, but slower and easier for market to adapt).

17 So what is the secret recipe? * a few big investors, or many small investors? * is there a market for promise? See Facebook, IPO offerings.. * advertising drives Google s profitability is a side business required? * will distributed funding sources = a sufficient budget? Is proprietary science at odds with the collaboration culture of modern science? * can we adapt an open source foundation model for knowledge generation, access to data?