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Speaker 1

00:00

We've been speaking with top economists about what this economic climate means for companies' bottom lines. Today, I'm speaking with economist Mariana Mazzucato. Mariana, thanks so much for being with me.

Speaker 2

00:15

Thank you. Happy to be here.

Speaker 1

00:16

Great. All right. So what's the biggest risk to a company's bottom line?

Speaker 2

00:20

The type of market outcomes we get depend on how companies are governed, how public institutions are governed, and especially how they interrelate 1 with another. So I think the biggest challenge we have today is we have misgovernance at every level. We have governments that have kind of forgotten their real role around public purpose.

Speaker 2

00:38

They're at best fixing market failures. They're too little too late and kind of depressed because they're always thinking about a failure or a financing gap. There's a hole to fill. The whole notion of stakeholder value should have become a real kind of call to arms of how do we create value differently.

Speaker 2

00:54

We need to bring communities, workers, public and private institutions together to create value in a more collective, better way that's purpose-oriented. Solving climate problems, solving all the sustainable development goals that every country has signed up to. And the how really matters. So I think the bottom line should be, how do we actually create a line, a trajectory, an investment plan towards solving the digital divide, towards producing more preparedness for the next health pandemic, which will come our way.

Speaker 2

01:28

We don't have to have these massive lockdowns which hurt economic growth, they hurt business growth, but especially how can we make it really exciting? I mean, the reason the moon landing worked is actually it managed to catalyze so much activity, so many homework problems had to be solved. Along the way, we got camera phones, foil blankets, baby formula, software. This created commercialization, it created growth, it created profits, but profits for a purpose.

Speaker 1

01:56

I think you touched on a lot of different things that we want to talk about. So in mission economy you talk about citizen dividends, which to me sounds a lot like UBI. Can you talk to me about how that would help or hurt the U.S.

Speaker 1

02:07

Economy?

Speaker 2

02:08

So UBI is redistributive, right? It means that wealth creation is happening in the private sector. Let's just assume they pay their tax, it goes back to government, which then sends a check out to people receiving UBI.

Speaker 2

02:21

I prefer a citizen's share. In other words, if we actually co-create value in what I call a mission-oriented way, which requires public, private, capital, labor, third sector to work together, then how do we make sure that we're not just socializing risks, but also socializing rewards? In other words, that the way we distribute the wealth that's created is also in proportion to how that wealth was created in the first place. So, you know, why is it that it's so easy for Lloyd Blankfein, you know, to have called Goldman Sachs workers the most productive in the world?

Speaker 2

02:56

Because we have a way to measure the work that's done by Goldman Sachs workers that then are very kind of proud to be seen as productive members of society, whereas school teachers, do you ever hear them calling themselves wealth creators? And they create huge amounts of value in wealth. And surprise, surprise, 1 is the arrogant part, which calls itself value creating, and the other part is kind of a bit timid but doing the job every day. Nurses, doctors, school teachers.

Speaker 1

03:24

That's very interesting. Sort of playing on that, how does risk management play a role in companies' bottom lines?

Speaker 2

03:30

We need a new narrative of what even entrepreneurship is, what is risk-taking. Why is it that even though everything in my phone and your phone that makes it smart and not stupid was not only publicly financed, internet, GPS, touchscreen, Siri, all came out of the taxpayer, but also was risk-taking investment. For every investment in the Internet there was lots of failures.

Speaker 2

03:54

For every investment in GPS there was lots of failures. So any venture capitalist would tell you that's normal. They'll say for every success you need to basically bear with 789 failures. Why do we accept that and even embrace it in the venture capital community?

Speaker 2

04:08

And as soon as government makes a mistake like Solyndra, we blame it. We say, oh, another basket case government. It doesn't know how to pick winners. It should just level the playing field and get out of the way.

Speaker 2

04:18

The pharmaceutical industry, the energy industry, a lot of that high-risk, early-stage capital-intensive investment came from the public sector, with the private sector coming in later. Risk-taking itself is collective. We need to think about what is an entrepreneurial ecosystem. How do we actually make sure that all the different actors in the system are embracing not just risk, but uncertainty, which is much, much deeper.

Speaker 2

04:44

So that requires more than just a statistical model.

Speaker 1

04:47

Sure. That sort of leads into my next 1. So how can we tangibly make sure that the public benefits from private innovation, especially when that innovation, like you said, was originally publicly funded?

Speaker 2

04:57

Let's just take medicines, right? In the United States, the National Institutes of Health, which are publicly financed, are responsible for 75% of new molecular entities with priority rating. What do I mean by that?

Speaker 2

05:10

The radical drugs, instead of the Me Too drugs, a slight variation of an existing drug. So you would think then, given this risk-taking investment coming back to risk, because much of that investment fails, as is normal in innovation, if the government is responsible from its financing of this decentralized, you know, centralization doesn't work, a decentralized network of public institutions that get us radical drugs, radical energy before the private sector comes in, solar and wind were all invested in before the private sector came in, and definitely with the IT revolution in the case of medicines, why why why why do the prices of drugs, medicines, not reflect that contribution from the public? Why is it then that the taxpayer pays once, twice, 3 different times? So this isn't about socialism.

Speaker 2

06:00

This is about proper capitalism. If you've invested in something, surely you want access to it.

Speaker 1

06:05

I want to shift gears just for a second. Will AI change the way companies do business? And what does that mean for employees and employers?

Speaker 2

06:13

General purpose technologies, which include new forms of energy, even includes like mass production, includes nanotechnology. These have often influenced new changes in production and distribution and consumption, right? So it means a new technology, a new technological revolution that impacts the whole economy, not just 1 little, you know, gadget or something.

Speaker 2

06:37

Even Google's algorithm was financed from the National Science Foundation, the internet was financed by DARPA, GPS was financed by the Navy. The big questions we're asking today around AI, but even just big tech in general in terms of privacy, how our data is being used, do we know how it's being used, the GPT now 5.0 or whatever, we're coming to. There's so many design challenges. How can we make sure these algorithms take into account issues that we know we care about?

Speaker 2

07:06

Just look at the Human Rights Declaration, right? There's a lot of good information there, but also the Sustainable Development Goals, which I mentioned before. These are all important in terms of defining what kind of planet do we want to be living on? What kind of growth do we care about?

Speaker 2

07:21

Is it just growth for growth's sake or is it inclusive and sustainable growth? So there's real design challenges especially today where a lot of the talent that used to be distributed is in 4 or 5 companies around artificial intelligence. So there's profits being earned in excess of the underlying innovation. That has then affected massive, what I call again, rents, which are used then to hire in, right, some of the top workers, labor, to work for the companies.

Speaker 2

07:52

Much of this, if you look at AI, used to be in universities, places like Stanford, MIT. It's now much more profitable for top academics to be doing artificial intelligence research for the big 4 or 5 companies in this space and not in universities or even not in DARPA. And what I think is healthy would be if that talent pool was distributed.

Speaker 1

08:15

You called it digital feudalism in 1 of your books. So people do spend hours online.

Speaker 2

08:19

So what- I'm glad you said that, by the way, because there's a book out that's called Techno Feudalism. I came up with the word about 7 years ago.

Speaker 1

08:25

You definitely did. And I was like, oh, that's a great way to put it. But how can we add value to that for the average person.

Speaker 1

08:32

So what is the value of our personal data and how should it be protected? It sounds like it should be the role of the government somehow but how can we actually implement that?

Speaker 2

08:40

Well you know it's interesting what can be done to make sure that we have aware conscious utilizers but also creators of this digital space that is helping to direct this economy again to be conclusive sustainable and so on. So I do think education is key because I there's just a complete lack of awareness. I mean no 1 reads everything when you say, accept all.

Speaker 2

09:03

Let me use this app, please. Get on with it. The actors in this space love to talk about entrepreneurship, capitalism. Think of Elon Musk embracing of capitalism, and yet we end up with the feudal structure.

Speaker 2

09:15

The article I just wrote called Mapping Modern Economic Rents, or how are rents, so excess profits and value extraction, being earned by pharmaceutical companies, by large financial firms, by large real estate companies, you know, and that goes back to the original land rents, but also modern algorithms. Growth valuations, we put anything that has a price. So if you marry your babysitter, GDP goes down. I'll let your listeners figure that 1 out.

Speaker 2

09:43

Or if you pollute, GDP goes up, because you got to pay someone to fix it. It's this big dysfunctionality to how we measure growth. We're trying to look at how the design of the algorithms themselves are reproducing a feudalistic value extraction system instead of this wonderful entrepreneurial system that we all pretend exists out there.

Speaker 1

10:04

I think you'll laugh at this 1. Will the U.S. Remain the world's leading economy?

Speaker 2

10:08

Is it the world's leading economy? That's news to me. No.

Speaker 2

10:15

Actually, let me make this not a joke. So the big change today is that US competitiveness, first of all, it's not happening in a mercantilistic way that Trump was advocating for, was just build a wall or trade relationships. It's about investment, investment, investment, the CHIPS Act. But what's striking is that the total of close to $4 trillion, if you add everything up, including the Inflation Reduction Act, this is a lot of money.

Speaker 2

10:40

So how do we make sure that this money, which the US is using for competitiveness, embodies within it conditions, or we can think of it as reciprocity, something that sounds a bit better, that really helps to rethink the social contract between all the different actors we've been talking about, public, private, capital, labor. So we truly build back better, build forwards better, and aren't just using the money to recover. First from the financial crisis, then the COVID lockdown, now the Ukraine war with the supply chain problem, and of course the whole desire to be autonomous from Asia's competitiveness. That's why I kind of joked in the beginning on whether we were the most competitive on chips and potentially even on AI.

Speaker 2

11:20

The real question is how do we also see these problems as global? The collective action that's required, not just the national action, is critical. So we are actually truly a global community and so we both need to think of national competitiveness and it would be naive to say it doesn't matter, but unless we solve the biggest problems of our time around health, climate, digital, and also AI with a global lens, then we're not going to be better off.