....once you take into account the number of SME jobs lost after the first three years of their creation, there is very little net job creation by these firms. Only 1% of new enterprises have sales of more than £1 million six years after they start. Research at the University of Sussex shows that median sales of a six-year-old firm is less than £23,000 (Storey, 2006). These firms also tend to be the least productive and least innovative (R&D spending—the best measure we have for inputs in the innovation process—in Tech City is not higher than in other parts of London or Britain). Indeed, the few high growth innovative firms (about 6% of the total SME group, Nesta, 2011)—those that really should be supported—do not directly benefit from the hype that surrounds SMEs and startups: once they get the funds these are too diluted to make a difference.
Innovation-led “smart” growth has occurred mainly in countries with a big group of medium to large companies, and a small group of SMEs that is spun out from some of those large companies or from universities. These firms have benefited immensely from government funded research. Indeed, in my book I show how many firms in Silicon Valley have benefitted directly from early-stage funding by government, as well as the ability to build their products on top of government funded technologies.
Every technology that makes the iPhone smart was government-funded (internet, GPS, touch-screen display, SIRI). Apple spends relatively little on R&D compared with other IT firms precisely because it uses existing technology. It applies its remarkable design skills to these technologies, effectively surfing on a government-funded wave. Apple, Compaq and Intel also all enjoyed the benefits of early-stage public funds (SBIC in the case of Apple, SBIR in the case of Compaq and Intel).
Silicon Valley firms were initially not funded mainly by venture capital. It came in after the ball had got rolling thanks to funding by the Department of Defence, the Department of Health and, more recently, the Department of Energy. In fact, there is increasing evidence that many startups are told by venture-capital firms to go first to SBIR and then come back (Block and Keller, 2013).Venture-capital funds are not providing the kind of patient long-term finance needed for radical innovations. They are too focused on a profitable “exit”—usually through an IPO or a sale to a bigger company—within 3-5 years. But innovation often takes 15-20 years.
In Germany such links are created by well-funded Fraunhofer Institutes. In Britain these are being imitated through the Catapult centres, which in theory should be linked to Tech City-type projects, either through procurement policy or via learning. Currently there are no links between these. And whereas the Fraunhofer system has an annual research budget of €1.8 billion ($2.4 billion) and a network of 20,000 staff across 60 centres (in 2010), Britain’s Catapult centres were given just £200m to spend over 4 years. When the Tech-City gurus in Number 10 Downing Street criticise the Technology Strategy Board, which is in charge of the Catapult strategy, for not being more like Darpa, they ignore the very different size of TSB’s budget in comparison with Darpa—and even more the fact that the TSB does not have the market creating potential that Darpa does.
Research at the University of Cambridge (Hughes 2008) suggests that the British government spends (directly and indirectly) close to £8 billion ($13 billion) annually on SMEs—more than it spends on the police and close to the amount it spends on universities. Is this warranted? How do we know it would not be better to simply direct that money to teachers where there is plenty of evidence that quality education raises human capital and growth.
1. The Economics of a Robot Future (Has a lot of Social impact thrown in)
2. Technology Possibilities
3. Robots of the Past & Future
4. Robots and Justice (which has a whole 'nother slew of Socio-Economics)
- it is light on the actual technologies and how it all works, IMO its useful to have a grasp of the basic emergent technologies - stops the flights of the the fanciful.
- there is a bit of Panglossing over the downsides. Who owns these automated means of production for example? To whom will the newly liberated labour productivity wealth flow?. Promises of a leisure-filled and abundant future for a happy humanity should be put in the same bin that the self same predictions in the 1930's and 1970's were.
"The cry of forthcoming robot revolution won't be "I'll be back" or Exterminate, but 'Unexpected item in bagging area"
6. As always though, realizing potential comes down to execution.
- The FB team are very focussed, Twitter is harder to judge - lots of change at the top over the years, we wouldn't be at all surprised if they bring in an "Eric Schmidt" figure.