CEOs should personally fund innovation
The MIT Technology Review magazine recently covered the topic of innovation funding in its latest Business Report. A major theme is that traditional funding mechanisms of corporate R&D and mainstream venture capital have been ineffective for the last decade.
Nathan Myhrvold, a renowned business leader in the technology industry, argues that wealthy individuals offer one valuable mechanism for funding “big ideas”—the radical innovations that change the world. He writes, "Our challenge now, especially for those of us whose financial success is the greatest, is to think big."
Having the “1%” funding big ideas is a well-known practice throughout America’s history. Steel industrialist Andrew Carnegie—a Scottish immigrant whose life is a true rags-to-riches story—became an active philanthropist after achieving success. One of Carnegie’s big ideas was to provide everyone in the United States with the opportunity to become self-educated. Beginning in 1881, Carnegie started and helped build a national system of public libraries. In hindsight, the Carnegie libraries are a predecessor of the distributed network of free high-quality information that we experience today with Wikipedia, open education resources, and emerging massive open online courses.
Global examples abound, too. Jamsetji Tata, often regarded as the father of Indian industry, imagined a vibrant and industrialized India. In 1892, he began a sweeping effort to advance the Indian nation through higher education, and his two sons then carried on his actions and beliefs. Among many efforts, they gave India its first institute for social sciences, its first cancer hospital and research center, and its first institute for fundamental research. Today, the Tata family trusts own a combined 66 percent of the shares in Tata Sons, its main holding company. Built around the growing success of their family’s businesses, the Tata trusts continue to be “long term supporters of social causes, community projects, and academic institutions” based on Jamsetji’s original vision.
A growing number of big ideas are again being funded and led by successful business leaders. Myhrvold names Jeff Bezos and Elon Musk as two leaders willing to take the long-term view. They all recognize that the big returns come from the big advances, and that those take time.
Warren Buffett has been instrumental in encouraging many wealthy business leaders to take a more active role in spurring progress and innovation. He established the Giving Pledge, which aims to get the super rich to pledge their fortunes early in their lives so that they can have more control of how and where the funds are spent. While the Giving Pledge is best known for its focus on billionaires, it takes its inspiration from all givers who pursued big ideas past and present.
When Bill and Melinda Gates set up their foundation, Buffett told them: “Don’t just go for safe projects. Take on the really tough problems.” The Gates’s took his advice to heart. Through their foundation, they are addressing huge challenges in the developing world, including malaria and HIV, where possible solutions will take longer than most other organizations are willing to consider. The Gates’s explain that they are willing to make bets on promising solutions that governments and companies can’t afford to make.
Ultimately, business leaders may be the most important long-term source of innovation funding. While wealth provides a large lever to use in the pursuit of innovation, it is the experience and vision inherent in business leaders that provide the real force for change. As Myhrvold points out, “We have the experience and resources to look for game-changing ideas—and the confidence to act when we think we've found one.”