Government Has Nearly Limitless Funds But Cannot Move Fast

I have never had a career that placed me inside a government institution, but through my work I have found myself deeply involved with government bodies, or in situations requiring close coordination with academia. Now, fortunately, I hold a small seat within academia myself.

The greatest benefit of collaboration is, fundamentally, that each party compensates for the other’s weaknesses. So what are the respective strengths and weaknesses of industry, government, and academia?

The clearest case is “government,” meaning government institutions.

The government has, in effect, inexhaustible funds. In practice it faces constraints from various external factors — the need to control inflation, interest rate adjustments, and so on — but in principle, Japan, with a funding source capable of issuing fiat currency, has enormous flexibility. For example, Japan’s general account expenditure for 2021 exceeded ¥100 trillion. It’s said that in recent years, amid widening inequality, the top few percent of the world’s billionaires hold more than half of the world’s wealth, but even so, that’s off by one or two orders of magnitude. A national budget is that large. However, government’s weakness is that it cannot act for small, immediate results. Given that it holds a massive budget and bears the mission of strengthening the nation and protecting its people, it is extremely difficult for it to make decisions based solely on this year’s results or the benefit of a handful of people. Pushed to its logical conclusion, this thinking inevitably slows decision-making. That is government’s weakness. I once received investment from a government-affiliated corporation called INCJ. It was an institution created under the leadership of the Ministry of Economy, Trade and Industry during the first Abe cabinet, and while it had the form of a stock company, it was subject to government interference in many respects. Even so, its investment capital was enormous — more than ten times that of Japan’s major venture capital firms at the time — and it was said that “if properly deliberated in the Diet, this could even be doubled.” In fact, INCJ invested more than ¥200 billion in Japan Display, among other activities that were, in a sense, “unusual” in ways the private sector could never manage.

Next, consider “academia.”

Academia’s strength is, without question, its wisdom. Through my work I have dealt with professors and associate professors across various fields, and as someone who merely thinks he understands things — an outsider, really — I am constantly astonished by the sheer depth of their knowledge. I also believe researchers hold the most seamless attitude toward developments overseas. From a young age, they take it for granted to read papers in English, attend conferences abroad, and collaborate with researchers around the world, and I suspect this has the beneficial effect of keeping their perspective broad rather than closed. However, academia faces an extremely serious problem in most cases: budget. Since I am always fundamentally rooted in the operating company, my sense of budget when tackling a new product or a new theme is inevitably calibrated to that of an operating company. With all due respect, compared to that, the budgets researchers work with are an order of magnitude smaller — in some cases two or three orders of magnitude smaller. For an extremely important issue that easily attracts research funding, a large budget may indeed be allocated. But even then, compared to the budget for a truly massive industry development — a smartphone, say, or a new CPU — it’s almost always still one or two orders of magnitude smaller.

Finally, consider “industry,” particularly startups.

Startups lack almost everything. Not just capital — human resources, connections, organizational strength. Even specialized knowledge, which ought sometimes to be a strength, often falls far short of world-class standards. Startups often present something like a “member list” when meeting with investors. Impeccable academic credentials, flawless careers — truly a “winning team.” Personally, I think this kind of cheap appeal is utterly meaningless. And yet it works surprisingly well. In reality, in an organization like a startup where people constantly come and go, if career history means anything at all, it means something only for the co-founders and the CEO. No matter how formidable a lineup you assemble at launch for CTO, CFO, or COO, as I’ve written elsewhere, retaining talented people is extremely difficult. One might even call it impossible. So there is truly nothing there. All that exists is momentum.

Government’s fallacy: “We have the vision, so we should lead the whole.” People who set visions with no executional capacity are called dreamers or frauds in the real world.

Academia’s fallacy: “We know a great deal, and we judge what is worth challenging and what is not.” Science has always advanced through refutation. In the 1960s, global cooling was widely proclaimed; later research shifted the alarm to warming. I think there’s a reasonable probability that the logic for cooling could resurface again. Discovering phenomena that Newtonian mechanics could not explain, and attempting to solve them, is what gave rise to quantum theory and relativity. Believing you’ve explained everything, only to find there’s still more you don’t understand — holding that stance continuously is what scholarship actually is.

In other words, the above can be called “the fallacy of believing you know the answer.”

This is nothing other than typical overconfidence, arrogance, and lack of humility.

Discarding these properly is, I believe, the key to collaboration among industry, government, and academia.

In most areas of business, there is no convenient thing called the “right answer.” In this world, even the relationship between addition and multiplication must be questioned. Something that looks correct on a scale of ten or twenty years may not be correct on a scale of a hundred years. But if you dwell on that, you become unable to move. You become unable to do anything at all.

Now the argument approaches its conclusion.

An organization that can act despite lacking certainty — that is a startup, and it is industry’s greatest advantage. For better or worse, the world of industry overflows with failure. Learning something from failure, while still avoiding catastrophic loss to society as a whole from that failure — an ecosystem has formed that keeps turning on this basis.

An executive’s “odds of winning” or “path to victory” are, in most cases, invented after the fact. Because everyone knows this, they also know “there is nothing to learn from success.” This connects to the idea that what one should actually learn from is failure. Many inventions begin by chance. Even the meeting of Jobs and Wozniak was chance. Nothing can be set in motion by calculation alone.

In other words, government and academia should simply use industry as “a proxy for doing the wrong thing.” Though, of course, it won’t move the way you intend. So the picture looks like this: startups charge ahead toward whatever innovation they’ve convinced themselves of, academia — sensing that “maybe a challenge like that could produce something” — supports them, and government institutions simply need to keep watch with a straight face, removing regulations so as not to obstruct that path, and supporting the process so that, if results miraculously emerge, they are properly returned to society.

There was a time when government-led innovation carried great significance.

America’s moonshot under President Kennedy — the Apollo program — is perhaps the ultimate example of this. Many new technologies emerged in the process, and they ultimately became a wellspring of various forms of prosperity that reached even ordinary people’s lives. However, this scheme itself is nothing but an old, well-worn one, unchanged since long, long ago. Yes — war. Nation-led competition against other countries intensifies nationalism. In fact, the push behind the Apollo program carried a clear intent: to restore American pride, which had been fading at the time.

It seems to me we no longer need to rely on such an old scheme. A major reason is that information asymmetry is weakening at an accelerating pace year by year. Today, even an elementary school student can use the internet to verify whether what some UN dignitary says is actually correct. Before long, national projects will no longer be monopolized by a handful of large corporations either.

Industry charges ahead, academia follows, and government cleans up afterward and makes the pieces fit. This kind of collaboration among industry, government, and academia has already begun, here and there.

Originally published in Japanese at https://clazytech.com/2021/08/505/. Translated with LLM assistance and reviewed before publication.