5 Innovation and Technology Assessment
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DANIEL D E SIMONE Office of Technology Assessment, United States Congress, Washington, D.C. 20510
The climate for innovation has taken a steady pounding in recent times. By comparison, the climate was salubrious in the early 1960's. Entrepreneurs flourished and venture capital flowed readily to finance new technological initiatives with long-term pay offs. Innovators and entrepreneurs took big chances in an economic environment that encouraged the creation of new technologically based enterprises. The risks were high, but so were the potential rewards. Since that time, darkening skies have characterized the climate for innovation and they have dampened entrepreneurial and innovative spirit in America. They seem to have come hand-in-hand with the increasing centralization of decision-making in our society and with economic policies that encourage consumption and discourage investment for the future. Although it purports to be able to, a ham-handed federal government has amply demonstrated that i t cannot efficiently and wisely handle a l l of the levers in a $2,300 Billion economy. Stagflation has pulled the rug out from under Keynesian economics and its federal practitioners. Excessive federal spending and monetary expansionism and rampant interventionism and tinkering with the productive apparatus of the economy have been antithetical to "letting a thousand flowers bloom" in the fields of innovation. As a result, the "Innovation Indicators"—the signs that tell us something about the health of the U.S. scientific and technical enterprise—have taken a decided dip over the past decade. As you know, the Carter Administration has been engaged in a Domestic Policy Review on Innovation. What you may not know is that this has been a custom of every administration for the past 20 years. o In 1961, President Kennedy urged that technological innovation be stimulated and unshackled, o In 1965, President Johnson exhorted his administration to do likewise.
This chapter not subject to U.S. copyright. Published 1980 American Chemical Society Smith and Larson; Innovation and U.S. Research ACS Symposium Series; American Chemical Society: Washington, DC, 1980.
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In the Nixon A d m i n i s t r a t i o n we had the "New Technology O p p o r t u n i t i e s Program" and, i n 1972, the White House sent Congress the f i r s t P r e s i d e n t i a l Message on Science and Technology. o In March of 1979, the C a r t e r A d m i n i s t r a t i o n followed s u i t and d e l i v e r e d i t s message on s c i e n c e and technology to the Congress. And we are soon to see, we have been t o l d f o r many months now, the f r u i t s of the Domestic P o l i c y Review on Innovation. C r i t i c s can be f o r g i v e n i f they sense a c e r t a i n d i s i n g e n uousness i n t h i s quadrennial d i s p l a y o f concern f o r the problems o f i n v e n t o r s , innovators and entrepreneurs. I t a l l seems to be p a r t of the " P r e s i d e n t i a l C y c l e " . . . and an eye to the next New Hampshire primary. These c y c l e s o f concern about i n n o v a t i o n generate a l o t of hot a i r i n Washington, l o t s of p o l i t i c a l hot a i r , so t h a t there i s a new theory on the uniqueness of Washington, D.C.: " I t i s the only place i n America," a p h y s i c i s t f r i e n d of mine has observed, "where sound t r a v e l s f a s t e r than l i g h t . " I f 20 years of P r e s i d e n t i a l s t u d i e s on i n n o v a t i o n are a h a r b i n g e r , i t i s u n l i k e l y that very much of the f i n e work that has been put i n t o the Domestic P o l i c y Review by Frank Press and h i s e x c e l l e n t s t a f f , as w e l l as the many outstanding advisory panels that p a r t i c i p a t e d i n t h i s e f f o r t , w i l l s u r v i v e the O f f i c e o f Management and Budget and Gerald Rafshoon and Company. My guess i s that what s u r v i v e s that process w i l l sound embarrassi n g l y f a m i l i a r . No new i n s i g h t s w i l l l i g h t the way. The sound w i l l probably s t i l l t r a v e l f a s t e r than l i g h t up Pennsylvania Avenue. To o l d hands, the pronouncements w i l l probably seem a f a m i l i a r l i t a n y of e x h o r t a t i o n s and admonitions. But i n f a i r n e s s , that misses the p o i n t , f o r the m e r i t of these pronouncements l i e s not i n n o v e l t y , but perhaps i n a r e a f f i r m a t i o n of some b a s i c principles: o That t e c h n o l o g i c a l i n n o v a t i o n i s the key to p r o d u c t i v i t y improvement and the economic and s o c i a l h e a l t h of our society; o That R&D, while i n d i s p e n s a b l e , i s but a prelude to innovation; o That transforming R&D i n t o new products, systems, and processes i s a h i g h - r i s k venture; o That the i n c e n t i v e s f o r doing so have to be commensurate with the r i s k s ; o That c r e a t i v e i n d i v i d u a l s , i n A b i g a i l Adams' phrase, do not " f a l l from the sky l i k e the God-given r a i n : " They must be nurtured and c u l t i v a t e d ; o And f i n a l l y , that i t i s f a r e a s i e r to s t i f l e i n n o v a t i o n than i t i s to s t i m u l a t e i t . Thesebasic p r i n c i p l e s were enunciated during the Johnson A d m i n i s t r a t i o n by a b l u e - r i b b o n Panel on Invention and Innovation.
Smith and Larson; Innovation and U.S. Research ACS Symposium Series; American Chemical Society: Washington, DC, 1980.
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I had the p r i v i l e g e of working with that Panel, which some of you may r e c a l l as the "Charpie Panel," named a f t e r i t s C h a i r man, Bob Charpie. We argued and debated and s t u d i e d the problems faced by i n v e n t o r s , innovators, and entrepreneurs. For a year we d i d t h i s , and then i t was my job to synthesize a l l of that into a f i n a l report. The t i t l e of i t was, as some of you may r e c a l l , T e c h n o l o g i c a l Innovation: I t s Environment and Management. B r i e f i n g s on the report were h e l d f o r members of the Cabinet and the heads of the r e g u l a t o r y agencies. I t was discussed p e r s o n a l l y w i t h P r e s i d e n t Johnson. No one can say whether they were persuaded, but they sure seemed concerned. What k i l l e d us, I think, was the p a r a l y s i s that was j u s t beginning to s e t i n then. L i k e so many aspects of n a t i o n a l l i f e a t that time, our recommendations f o r improving the n a t i o n a l climate f o r i n v e n t i o n and i n n o v a t i o n were a casualty of the Vietnam War and the "guns and b u t t e r " i n f l a t i o n that was beginning to smolder. The recommendations i n that r e p o r t covered t a x a t i o n , venture c a p i t a l , a n t i t r u s t and r e g u l a t i o n , patents, education, and the s p e c i a l problems faced by new t e c h n o l o g i c a l l y based e n t e r p r i s e s . What I remember most v i v i d l y , however, was the f i n a l recommendation. Let me read i t to you: "One more recommendation remains and i t i s , i n our view, of key importance . . . . "For whether we t a l k about the problems and c o n t r i b u t i o n s of a l a r g e or small company, a r e g u l a t e d or unregulated i n d u s t r y , o r an i n d i v i d u a l inventor or entrepreneur, there i s too l i t t l e a p p r e c i a t i o n and understanding of the process of t e c h n o l o g i c a l change i n too many c r u c i a l sectors: " — T h r o u g h o u t much of the Federal Government. — I n some i n d u s t r i e s . — I n many banks. — I n many unive rs i t i es . — I n many c i t i e s and r e g i o n s . "More important, t h e r e f o r e , than any s p e c i f i c recommendation concerning a n t i t r u s t , t a x a t i o n , the r e g u l a t i o n of i n d u s t r y , or venture c a p i t a l , i s one c e n t r a l p r o p o s a l : "The major e f f o r t should be placed on g e t t i n g more managers, executives, and other key i n d i v i d u a l s — both i n and out of government—to l e a r n , f e e l , understand and appreciate how t e c h n o l o g i c a l innov a t i o n i s spawned, nurtured, financed, and managed i n t o new t e c h n o l o g i c a l businesses that grow, provide jobs, and s a t i s f y people." Now, the need f o r that kind of a p p r e c i a t i o n and understanding, p a r t i c u l a r l y f o r those who determine the p o l i c i e s a f f e c t i n g i n n o v a t i o n , i s even greater today than i t was 12 years ago when the Charpie r e p o r t was published.
Smith and Larson; Innovation and U.S. Research ACS Symposium Series; American Chemical Society: Washington, DC, 1980.
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And the reason i s that a l l of the "Innovation I n d i c a t o r s " have been going down-hill s i n c e that time. I have compared v a r i o u s i n d i c a t o r s t h a t have been suggested as measures of the h e a l t h of the nation's s c i e n t i f i c and t e c h n i c a l e n t e r p r i s e . Dick Atkinson, the D i r e c t o r of NSF, provided some f i g u r e s r e c e n t l y , as d i d I r v i n g Shapiro of DuPont. Others have as w e l l . Before I get i n t o these f i g u r e s , l e t me begin with a caveat: Some i n d i c a t o r s can be m i s l e a d i n g . For example, i f we look at a b s o l u t e f i g u r e s and not j u s t r a t e s of change, i t i s c l e a r that the United States i s s t i l l ahead of the r e s t of the world i n terms of p r o d u c t i v i t y and investments i n R&D. Also, none of these i n d i c a t o r s gives us a s t r a i g h t cause-and-effect f o r e c a s t , but i n the aggregate they g i v e a c l e a r s i g n a l of changes i n the c l i m a t e f o r i n n o v a t i o n . As I s a i d , every one of these i n d i c a t o r s turned downward about a decade ago. One rough i n d i c a t o r i s R&D spending. As a percent of Gross N a t i o n a l Product, R&D funding, both p u b l i c and p r i v a t e , was down by about 20% i n 1978 from what i t was i n 1968. A second i n d i c a t o r i s r e f i n e d from the f i r s t one: the amount of R&D spending that goes to b a s i c r e s e a r c h . That not only t e l l s us something about the r e s e r v o i r we w i l l be drawing from a good many years hence; i t a l s o t e l l s us a l o t about the p r e v a i l i n g a t t i t u d e s toward the f u t u r e . I t ' s an o p t i m i s t i c country that makes a b i g investment i n i t s f u t u r e f o r the next generation. What does the r e c o r d show about our commitment to b a s i c research? The f r a c t i o n of GNP devoted to b a s i c research was about 20% l e s s i n 1978 than i t was i n 1 9 6 8 — a l t h o u g h I should say that i n adjusted d o l l a r s , the support f o r b a s i c research i s about the same now as i t was then. A t h i r d i n d i c a t o r i s p r i v a t e spending f o r R&D. This i s the one most c l o s e l y a s s o c i a t e d with r e a l economic growth and the a b i l i t y to compete i n t e r n a t i o n a l l y . From t h i s one comes the technology to create most of the permanent new j o b s . The U.S. i s now spending l e s s i n t h i s column, as a percent of GNP, than e i t h e r Germany or Japan. A f o u r t h i n d i c a t o r i s corporate p r o f i t a b i l i t y , and the key measurement here i s not gross d o l l a r s , but the a c t u a l purchasing power o f the d o l l a r s l e f t a f t e r taxes. A f t e r you squeeze out the i n f l a t i o n and put aside enough money to cover replacement at today's p r i c e s f o r the p l a n t and equipment that i s wearing out, there i s l e s s l e f t to encourage new ventures now than there was 10 years ago. Walter Wriston, the Chairman of C i t i c o r p , commented on this r e c e n t l y . He objected to government spokesmen who were t r a v e l i n g around the country t e l l i n g people that the r e a l v i l l a i n s of i n f l a t i o n are the business men who are r a i s i n g t h e i r p r i c e s and the l a b o r unions that are r a i s i n g wages. He observed that "the government's a b i l i t y to devastate an economy and blame i t on
Smith and Larson; Innovation and U.S. Research ACS Symposium Series; American Chemical Society: Washington, DC, 1980.
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someone e l s e can never be overestimated, "The reason we have i n f l a t i o n i n t h i s country," he explained, " i s that s i n c e 1967 the government has caused the money supply to grow n e a r l y three times as f a s t as the goods and s e r v i c e s t h a t can be bought w i t h it." I t i s sobering to r e c a l l that i t was N i k o l a i L e n i n who s a i d : "The best way to destroy the c a p i t a l i s t system i s to debase the Currency." From an i n f l a t i o n r a t e of 2-3% i n the mid 1960 s, we are now a t 13% and c l i m b i n g . A f i f t h i n d i c a t o r i s the burden being placed on the Nation's productive apparatus by government. Given a c a p i t a l - s t a r v e d economy, i t i s l i t t l e wonder that managements w i l l tend to a v o i d the longer-term r i s k s f o r those that are shorter-term and l e s s uncertain. Government r e g u l a t i o n s have mushroomed over the past decade and, consequently, so too have the p e r c e i v e d r i s k s f o r investments i n i n n o v a t i o n . Now, r e g u l a t i o n s f o r h e a l t h , environmental and s a f e t y reasons are a b a s i c m i s s i o n o f government. Many of these r e g u l a t i o n s have spurred i n n o v a t i o n s , such as more f u e l - e f f i c i e n t automobiles. However, i t i s also true that r e g u l a t i o n , by d e f i n i t i o n , u s u a l l y c o n s t r a i n s the scope of i n n o v a t i v e a c t i v i t y — e s p e c i a l l y the i n t r o d u c t i o n of new drugs or chemicals. Consequently, the question i s now whether government r e g u l a t i o n a f f e c t s the c l i m a t e f o r i n n o v a t i o n , i t does o f course. Nor i s the question whether or not there should be government r e g u l a t i o n . Of course, there must be. Rather, the question i s how can we provide a more r a t i o n a l b a s i s f o r government r e g u l a t i o n ? How can government perform i t s proper regulatory r o l e , while minimizing the b a r r i e r s to the c r e a t i v e renewal of s o c i e t y ? Technology assessment i s one of the ways to provide a more r a t i o n a l b a s i s f o r these kinds of decisions. In the l a t e 1960 s and e a r l y 1970 s Congress had been put through a t e c h n o l o g i c a l wringer. Scores o f unevaluated and i r r e c o n c i l a b l e a s s e r t i o n s and o p i n i o n s had handicapped Congress i n a p p r a i s i n g such h i g h l y t e c h n i c a l matters as the a n t i b a l l i s t i c m i s s i l e , the SST, environmental standards, food a d d i t i v e s , and advanced r a p i d t r a n s i t s y s t e m s — t o name j u s t a few. I t was f o r t h i s reason that the Congressional O f f i c e of Technology Assessment began i t s work i n 1974. I t s job i s to assess the impacts o f t e c h n o l o g i c a l a p p l i c a t i o n s and to i d e n t i f y the advantages and disadvantages of a l t e r n a t i v e p o l i c y options f o r enhancing the b e n e f i t s and reducing the costs of such a p p l i cations . Some of you may r e c a l l that when OTA began i t s work i n 1974, i n d u s t r i a l i s t s and others i n the s c i e n t i f i c and t e c h n i c a l community viewed i t w i t h s t r o n g m i s g i v i n g s . They feared i t would be a brake on progress, and some r e f e r r e d to i t s c a t h i n g l y as the O f f i c e of Technology Harassment. But the r e c o r d shows
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Smith and Larson; Innovation and U.S. Research ACS Symposium Series; American Chemical Society: Washington, DC, 1980.
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that OTA has d e f i n i t e l y remained i m p a r t i a l w i t h respect to t e c h nology. OTA's job i s not to advocate. I t i s n e i t h e r protechnology nor a n t i - t e c h n o l o g y . I t i s true t h a t some of the most ingenious technologies can go awry or be misused. Everybody has a l i s t : phosphate detergents, thalidamide, Three M i l e I s l a n d , and so on. However, the concern f o r t e c h n o l o g i c a l m i s a p p l i c a t i o n s goes too f a r when i t becomes a crusade to t u r n o f f a l l technology. Turning o f f nuclear power p l a n t s means t u r n i n g on c o a l - f i r e d ones. The r i s k s won't go away. Learning how to cope w i t h r i s k s i n a r a t i o n a l way i s perhaps the most fundamental challenge to a democratic s o c i e t y . And t r y i n g to put a cap on t e c h n o l o g i c a l i n n o v a t i o n i s not a r a t i o n a l response to t h i s challenge. For t e c h n o l o g i c a l i n n o v a t i o n i s indispensable to s o c i a l progress. T h i s was brought home d r a m a t i c a l l y by Richard Strout of the C h r i s t i a n Science Monitor i n an a r t i c l e on world population. Each day, he s a i d , adds a new Toledo, Ohio, to the world: t h a t i s to say, 250,000 people each day. That comes to 90 m i l l i o n more people a year, i f you keep on adding i t up. It i s technology that has made these staggering i n c r e a s e s p o s s i b l e . And i t i s the i n c r e a s i n g a s p i r a t i o n s o f t h i s e v e r - i n c r e a s i n g world p o p u l a t i o n that makes technology i n d i s p e n s a b l e . I t i s easy to bemoan the problems that have r e s u l t e d from some a p p l i c a t i o n s of technology and to advocate a r e t u r n to the simpler l i f e s t y l e s of yesterday, to a s o c i e t y l e s s dependent upon technology. Those simpler times were p o s s i b l e when there were fewer people w i t h more l i m i t e d a s p i r a t i o n s . But today we have no choice but to go forward, s t r i v i n g to increase our understanding of the world around us. We cannot r e l y on the c r y s t a l - b a l l gazers, f o r the f u t u r e has a way o f mocking the f u t u r i s t s . And so, w e ' l l have to r e l y on good judgment. Some 20 years ago John Von Neumann s a i d that "For progress there i s no cure. Any attempt to f i n d autom a t i c a l l y s a f e channels f o r the present e x p l o s i v e v a r i e t y of progress must l e a d to f r u s t r a t i o n . The only s a f e t y p o s s i b l e i s r e l a t i v e , and i t l i e s i n an i n t e l l i g e n t e x e r c i s e of day-to-day j udgment." That sums up what we can expect from technology assessment. I t i s not a magic formula and never w i l l be one. I t i s not even an exact s c i e n c e , although i t draws on a l l s c i e n c e s . But i t i s a way o f p r o v i d i n g a more r a t i o n a l b a s i s f o r the d e c i s i o n s that governments and s o c i e t i e s w i l l make one way or another. RECEIVED December 18,
1979.
Smith and Larson; Innovation and U.S. Research ACS Symposium Series; American Chemical Society: Washington, DC, 1980.
