The Entrepreneurial State - Book Summary

Embark on a journey to comprehend the significance of an entrepreneurial state.

We live in an era of profound global challenges. The adversity posed by climate change alone demands unprecedented levels of international unity, political dexterity, and, above all, innovation. But where should this innovation originate? What role should the government play? Is it wise to leave it entirely to corporations and market forces? Or should the state intervene more actively?

Let's embark on a journey that reveals the blurred boundaries between the state and entrepreneurship, asserting that they are not opposing entities, but rather pieces of a mutually beneficial puzzle — as harmonious as a well-crafted sandwich.

On this journey, we'll uncover

who truly pioneered Google’s search algorithm;

why it’s unwise to solely depend on corporations for green technology development; and

the debt that Apple owes to American taxpayers.

Surprisingly, the government is a strategic investor you didn't know about.

Every other day we witness firms like Google, Facebook, and Apple unveiling remarkable innovations, which often paint them as lone wolves conquering the business landscape. But, should they be the sole recipients of our accolades?

Let's unravel an unexpected truth: none of these organizations or even the technology sector itself would be where they are today without the instrumental role of an often overlooked entity: the state.

Consider Google. Over the last decade, this tech giant has emerged as one of the most transformative forces in our world, practically dictating our interaction with the internet. This domination is anchored on a singular innovation: Google's search algorithm, an invention that most people believe was conceived solely within Google's walls. .. but is that the truth?

Surprisingly, it isn't! Google’s groundbreaking algorithm was actually a product of research and development backed by state funding. The private sector played no part in it — investors were just too apprehensive to endorse Google’s trailblazing endeavor.

This isn't an isolated incident — there are numerous examples of the public sector demonstrating impressive foresight. Yet why do public sentiment and even economics scholars tend to view public sector involvement in the market so unfavorably?

The distortion of historical truth seems to play a part. The accomplishments of the state often get bundled up as triumphs of a bold and inventive private sector, while private sector failures get recast as blunders made by the state.

Consider the financial crisis of 2007, often associated with excessive public sector debts. In 2011, British Prime Minister David Cameron pledged to grant the private sector more autonomy to counteract the adverse effects of ill-judged government investments and the apparent red tape that were considered the catalysts of the crisis.

However, let's not forget that the primary catalyst of the crisis was the private sector. Corporations relentlessly pursuing profits, most notably in the US real estate sector, spiraled out of control, inflating a colossal financial bubble that eventually caused the crisis.

With this perspective, it's high time we revisit and reconceptualize the role of the state in the business world.

The state emerges as a bold, innovative financier taking risks.

Success is seldom achieved without embracing risks. If we aspire for our economy to thrive, mere safety won't cut it. Only by venturing into the realm of novel and unproven technologies can we hope to witness the progress we desire. So, who should be willing to take these leaps?

Numerous promising startups often resort to venture capital for funds and backing. But is this the optimal approach? Granted, venture capitalists are eager to inject money into ventures that show a profit potential. However, when it comes to cutting-edge innovation and research, venture capitalists often back down for fear of losses.

After all, meaningful innovation is not an overnight phenomenon. It's a journey spanning years of development, with the possibility of profit remaining uncertain until the very end. Rather than betting on such odds, venture capitalists typically prefer to wait for someone else to come forward and bankroll these radical ideas.

Thankfully, the state has demonstrated that it's the bold risk-taker we need to propel technological progress. Earlier, we discovered how the state facilitated the development of Google's search algorithm. But did you know that the US government also played a pivotal role in birthing the internet?

The US Department of Defense recognized the vast potential of "online" information exchange and invested years into nurturing the technology that has now become a ubiquitous part of our lives.

Realizing its capacity for innovation, the US government decided to embrace its role, unafraid of the massive risks involved.

In 1982, it launched the Small Business Innovation Research program (SBIR). The SBIR provisioned yearly funds to small firms in need of research funding, thus enabling the development of new technologies. Today, SBIR redirects two billion dollars towards trailblazing tech enterprises and startups.

Even Apple, the tech behemoth, owes part of its success to the state. The iPhone, often perceived as the zenith of Steve Jobs' brilliance, packs multiple features. Yet, many of these capabilities, like internet connectivity, GPS, touch screen functionality, and other communication technologies, are innovations fueled by state funding.

From these observations, it's evident that the state is a crucial player in driving technological evolution. Recognizing this role becomes even more important as a new technological wave emerges. It's not just information technology that stands to gain from state investment, but also the burgeoning green technology sector.

The Entrepreneurial State, the undeterred champion of green technology advancement.

Climate change is an undeniable reality that is dramatically affecting our planet. With finite fossil fuels running dry and our world's climate growing increasingly erratic, our technologically reliant civilization is in a quandary, demanding unprecedented energy supplies. We're grappling with a colossal challenge.

Green technology emerges as our silver lining, a promising solution to meet the escalating global energy demands while simultaneously curbing climate change. By harnessing solar, wind, and hydro power to generate electricity, we can let go of our dependence on finite, environmentally damaging resources like coal and fossil fuels.

This sounds promising, but there's a significant barrier to surmount: green technologies need further development to cater to our densely populated, globalized world. This development calls for deeper research, and this research, in turn, necessitates increased funding.

Venture capitalists, however, seem reluctant to step in. Their fear of not seeing a return on investment in green technology seemingly outweighs their concern for climate change itself! This is where the entrepreneurial state comes into play. Governments across several countries are stepping forward to fuel the growth of green technology.

For green technology to truly succeed in the energy market, it requires consistent legal and economic backing. Unless green technology becomes cost-competitive against environmentally harmful energy sources, its widespread adoption will remain a distant dream.

Acknowledging this, governments in Germany and China are demonstrating global leadership in their entrepreneurial support of green technology, investing millions every year towards a sustainable future. And their efforts are bearing fruit: in Germany, from 2000 to 2014, the share of energy from renewable sources like wind, solar, and biogas, rose from 6.3 percent to 30 percent.

Green technology, whether we acknowledge it or not, is the future. States must embrace this reality and extend their support before it's too late.

Successful state-funded innovations should benefit citizens and boost the economy.

We've established that the iPhone as we know it wouldn't exist without state-funded technologies. However, if you're expecting Apple to give due credit to the state for this, you'll be disappointed.

Herein lies the issue with Apple: while it rakes in enormous profits, its contributions to the American economy are relatively meager. Companies typically receive funding with the expectation that they will create new jobs with decent wages and offer opportunities for skill development to their workers.

Yet, Apple creates very few jobs in the United States. Most of its assembly processes happen abroad, while wages for Apple store employees often equate to what a Wal-Mart sales clerk earns. Given its enormous financial success, Apple is undoubtedly in a position to pay higher wages to its US employees. However, instead of raising wages, Apple chose to distribute forty-five billion dollars among its shareholders.

To prevent private sector companies from falsely portraying themselves as the sole risk-taking geniuses, governments need to highlight how taxpayer money is invested in developing technologies that promise to make our world more efficient, convenient, and sustainable.

In achieving this, the state needs to claim a share of the rewards reaped through its astute investments. This could be accomplished by either taxing companies that benefit from these investments or demanding royalties on innovative technologies. Governments should also stop these firms from transferring their profits to other countries with lower tax rates, all the while raising public consciousness about the state's critical role in today's technological and business landscape.

The entrepreneurial state will play a crucial role in shaping the economy of tomorrow. Its research initiatives and risk-taking investments will continually propel innovation, driving the inception of breakthrough technologies that will connect our world and safeguard our planet.

Wrapping it all up

The pivotal takeaway from this book:

Pioneering technologies that have revolutionized our modes of communication today wouldn't have seen the light of day without the backing of state investments. By assuming the role of a daring, entrepreneurial investor and guaranteeing that citizens reap benefits from government investments, the state can fuel the progress of renewable energy technology.