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What is a loonshot? Why are they so often dismissed? And how can teams, companies, and governments nurture more of these great ideas? On this episode, author and biotechnology entrepreneur Safi Bahcall discusses his new book “Loonshots: How to Nurture the Crazy Ideas That Win Wars, Cure Diseases, and Transform Industries.”
After working as a consultant for McKinsey, Safi Bahcall co-founded the biotechnology company Synta Pharmaceuticals, serving as its CEO for 13 years. In 2011 he worked with the President Obama’s Council of Science Advisors on how to transform the future of US science and technology research. What follows is a lightly edited transcript of our conversation. You can download the episode by clicking the link above, and don’t forget to subscribe to my podcast on iTunes or Stitcher. Tell your friends, leave a review.
PETHOKOUKIS: A lot of what I do focuses on public policy, and when I think about that and about a lot of the business books on innovation that I see, a lot of it seems to be about how to find the next big thing. Where do those new ideas come from? How do we get better at generating those new ideas? Your book though, as it says in the title, is about how to make sure that those ideas, when they appear, don’t get shot down. How to make sure they don’t get lost or overlooked. How do we turn those ideas into actual products or services, or perhaps in the case of politics, into national public policy? To start us off I want to ask you to define what a loonshot is.
BAHCALL: Everybody knows what a moonshot is. It’s a big idea, a destination, or a goal like curing cancer, eliminating poverty or something. But the question is, how do we get there? It turns out that if you look back in history at the big ideas, the ones that have changed the course of science, business, or history, they rarely arrived with blaring trumpets and red carpets dazzling everybody with their brilliance. They’re usually dismissed, sometimes for years, sometimes for decades with their champions written off as crazy. Since there wasn’t any better word in the English language, I just made one up and I called them loonshots.
I think that’s fantastic. And we tend to talk a lot about what is the right kind of culture to make sure that those ideas which may seem crazy at first don’t get shot down or left behind, but that’s not what your book is about. Your book isn’t a culture book. It’s actually about how an organization is structured. What is the kind of structure — if I’m running an organization, whether it’s a government agency or a company, how do I make sure my company nurtures those crazy ideas?
You can think of culture as patterns of behavior you see on the surface, much like how in a glass of water you have molecules slushing around when they’re liquid and you have molecules rigidly locked into place when they’re solid. The problem with the focus of so much of the literature on culture, culture, culture — and I was one of the consumers of that literature when I first started a company about 20 years ago, and everything was about culture. It starts to feel a little unsatisfying because they all sort of sound the same and sometimes they’re opposite, sometimes they’re different. It’s really hard to put your finger on it. But the problem with that idea of culture is that it’s so hard to change. No amount of forcing employees to watch two hours of videos or to hold hands and sing kumbaya is going to do much, in just the same way that no amount of somebody screaming at molecules in a block of ice to loosen up a little is going to turn them into liquid. But a small change in temperature can get the job done. A small change in temperature can melt steel. That’s what I mean by structure, it’s what are those underlying designs and incentives that drive behaviors deep down across the organization that on the surface can result in different cultures. For example, if you reward rank, which is very typical in companies, i.e. you pay an assistant vice president less than a vice president, less than a senior vice president. Every time you go up, you get rewarded with these great big bonuses. You’re going to encourage a political culture. People will be stabbing each other in the back and shooting down their neighbor’s ideas in order to go up that ladder. On the other hand, if you reward and celebrate ideas and results, you’re going to create a very innovative culture. Political culture or innovative culture is what you see on the surface. Underlying that are the elements of structure, the design, and the incentives.
What are some sort of classic examples? Generally on the podcast, we talk a lot about public policy, but we’ll start with companies. What are some classic examples of companies that nurtured those crazy ideas and what were those small structural elements that helped make that possible?
Since you spend a lot of time talking about public policy, why don’t we actually go there? In many ways, this project started with a public policy question, I then veered off into companies because I was brought in to analyze the public policy question in part because I was different than the usual public policy types.
On the very first page you cite Vannevar Bush’s goal during World War II to turn the US into the initiator rather than the victim of — and I love this phrase — innovative surprise. So yes, you start by looking at the public policy, so I’ll let you take it from there.
What’s so interesting is that I started with public policy, that was seven or eight years ago, and the question was how should we shape the future of national research? I was working with President Obama’s Council of Science Advisors and I was brought in because most of the folks there were on the academic side. I did have some academic background, which meant I could speak their language, but I also had been running a public company at that point for many years so I had some business side understanding through healthcare and biotech. I was invited into this future of national research question and on the first day, the chairman of the group stood up and said your job is to write the next generation of the Vannevar Bush report.
Unfortunately, at the time I wasn’t very well educated in policy or history and so I had no idea who Vannevar Bush was or what his report was. So, I spent the next few months reading and learning a lot about the history of what he did and why he did it and why it seemed to work so well. What he did was right at the outset of World War II in early 1939, he recognized that the US was far behind Nazi Germany in the technologies that would be critical to winning the war. The Germans had invented these things called U-boats and submarines that looked ready to strangle the Atlantic, which they did for every year of the first four years of the war. These U-boats shot down more ships than the Allies could build. They had these planes that could out class any plane that the Allies had and looked ready to bomb Western Europe into submission, which they did within a matter of weeks. Then finally, two German scientists had developed this thing called nuclear fission, splitting the atom, which put Hitler within reach of the most dangerous weapon ever invented by man. Bush, who was at the time the dean of engineering at MIT, quit his job, moved to D.C., and talked his way into a meeting with FDR and told him we’re going to lose this war. It was a ten-minute meeting and it probably changed the course of the war, and actually the course of the United States for the next 50 years more than any other ten-minute meeting. He said, we’re going to lose this war and I have a proposal for you and he handed him one sheet of paper with three small paragraphs in the middle. He said, I want you to authorize a new group inside the federal government that will report only to me and I will report only to you and I will mobilize the nation’s scientists for war. I will develop the weapons that the US military, the Army, and the Navy are not willing to fund — the crazy ideas, the loonshots. FDR read it, signed it, okay. Bush turned around and got to work and of course the technologies that he built did, in fact, in the end turn the course of war. It helped shoot down the U-boats, it helped build nuclear weapons, but more importantly, the system that he created was a system for innovating enormously fast.
Literally this morning I’ve been in touch with members of the US military at very senior levels who also want to think about how do we nurture loonshots faster and better, how do we innovate faster and better? Because the life cycles of products and technologies, including military technologies, is just accelerating and if we want to stay ahead of the nation’s threats, we need to innovate faster and better as an Army and as a Navy and all of the branches of the service. I have kind of come full circle from where I started this project to right now. What was so interesting to me about what Bush did is that he didn’t try to change military culture at all. He recognized that the tight discipline, and the rigid hierarchies, and the redundancies, and the focus on quality and accuracy are essential in the military. If you want to assemble millions of guns, build thousands of planes and ships and tanks, and direct millions of soldiers and battles across four continents, you need very high accuracy. Risk, for example, the word risk means one thing to a soldier and one thing to a creative designer or artist or scientist. To a soldier, risk is a very bad thing. To a soldier, if you’re going onto a battlefield in a high-risk situation, that’s a bad thing. If you as a commander tell your general, I’ve really taken all the risk out of this battle, I’ve done this and that, the general will give you a big thumbs up. Fantastic, you’ve de-risked the situation. Imagine going to a creative scientist or an artist and saying you’ve really taken all the risk out of your art. That’s a horrible insult. So the environment you need to deliver operational excellence, whether that’s in the military or inside a company, is exactly the opposite, it is 180 degrees from what you need to create wild new ideas. Just the example of that English word, it means totally different things. In one case, you want to maximize intelligent risk-taking and in the other case, you want to minimize risk.
Whether you want to stick with the military or more broadly, do you think that we have a government and a country right now that is optimally designed to nurture risk and to nurture crazy ideas? Are we where we realistically could be?
No, and I don’t want to talk about work that’s in progress right now, but I think there’s a very high level of attention to exactly this. I think there are many military leaders in my experience that are focused on that as their number one priority. They’ve recognized that the nature of warfare is changing at a faster and faster pace driven by newer and newer technologies faster than it’s ever changed before and that the military that we had in the past and the systems that we had in the past may not be the right systems for what we need in the future.
Or even more broadly, beyond the military, just national science and research policy, obviously it seems like there’s all this fantastic stuff happening in Silicon Valley and gee, maybe they should just be taking the lead. Google spending tens of billion dollars in R&D, Amazon, all these tech companies. Is government doing what it should do to make sure the United States, whether it is militarily or just more broadly economically, the source of innovation?
Let’s separate out exactly as you did two things. One is the military and the other is the private industry economy. We need rapid innovation in both. In one case, it’s for national security and in the other case it’s to maintain a competitive economy on the world scale.
Which, of course, influences our military capability.
Of course, they feed off each other, absolutely. So many people get this wrong, especially in the context of my industry, which is drug discovery. In fact, I got a message that one of the reasons you wanted to talk to me was that I had written this editorial at some point on these congressional hearings that had been held about whether we should tax drugs because they come from federal research. So many people get this point so wrong. It’s so critical to understand it if we want to create the right policy and the right environment to help all of our industry succeed in a very competitive world. What we get wrong is that federal research was the secret sauce behind the United States’ success for the last 70 years, and a seamless transfer of federally sponsored research to industry, or as seamless as we can get it, is part of that secret sauce.
After Vannevar Bush essentially created a nursery for loonshots, which helped the military turn the course of World War II, it then evolved into our national research infrastructure: The National Science Foundation, the National Institute of Health, and so forth. People miss the fact that that federal research drove so much of America’s economic success since World War II. For example, the biotech Industry, GPS, Internet, even the transistor, the personal computing industry — so many of those industries got started based on federal research. With the transistor, which was the invention of the decade and transformed all our lives, probably more than any other single invention of the 20th century, we would have never gotten there if it wasn’t for the pure germanium and silicon crystals that were developed based on funding from federal agencies. So many other inventions came from that and the reason that people miss this so often, on both sides of the political spectrum, is something that you can call market failure. As someone who’s been in the public markets for many years and someone who is very enthusiastic about the ability of incentives, including economic incentives as well as any kind of incentive, to help drive improvements and competitiveness in the products that we produced, I am of course a big believer in markets. But markets will fail for a game theory reason, which is that when any one investment makes no sense for any one player, they won’t do it. And here’s what I mean by that: If you rewind the clock 40 years, the idea of genetic engineering, the idea of putting cells in the lab and somehow transforming their DNA so they will start producing proteins, as drugs was kind of a crazy idea — it was a loonshot. Would it have made sense for any one company to invest in that? No, any one company has a fiduciary duty and the CEO and the board have a fiduciary duty to make a reasonable return on investment for their shareholders.
When we talk about the R&D from companies like Google and Google talks about its moonshots, they aren’t just doing research to do research and maybe someday in the far future turn into a product — they’re looking for their moonshots to have a return on investment at some point. What you’re talking about, again, is sort of the earlier stage, right?
It is earlier stage. I actually have spent quite a while with a Google X group, for example, and they are in the business of growing companies. They have a positive return metric. They’re investing with a longer time scale and on some crazier ideas than other companies, but they’re not a non-for-profit institution. Their goal there is to create new companies and they’ve done that. They’ve successfully spun out companies that have attracted new capital and are headed towards revenue and profitability. Now, earlier stage, no one could have afforded to invest in biotech. That investment that the government subsidized created the biotechnology industry with tens of billions of, probably hundreds of billions by now, of revenue and profit and, of course, taxes in return for the federal government. But that has given us an incredible not only economic competitiveness, but because we are the world center for biotechnology, the leading nation in that research, there are all sorts of national security and geopolitical advantages to being the world leader in that particular technology, and that’s just one. The internet, of course, much of the interconnected internet got seeded by federal research, 3D Graphics, even the Google search algorithm, the students Larry Page and Sergey Brin were working off NSF fellowships on an NSF project when they and their advisor kind of stumbled on that algorithm or developed that algorithm. So many of our big companies, now trillion dollar companies, benefited from federal research which you could never have invested in. Even liquid crystal technology, which is in every smartphone screen, you couldn’t really have invested in that basic research. As an individual company, how do you justify to your board or your shareholders, “well, I think I’ll throw money at this stuff, I’ll be damned if it’s a product 25 years from now?” You can’t do that, so federal investment has been the secret sauce. The problem is that we are decreasing investment in that, just as other countries, notably China, have figured out that secret sauce and are doubling down on it.
Is the issue that you would like us to spend 10 times more or five times more or 25% more? Or do we need to spend it somehow differently? Are the current structures in place, the different agencies, is that basically fine but they’re just underfunded? How do you look at it?
There are three things we need to do: We need to spend more, spend differently, and not get rid of our most valuable assets by taking the people we train as graduate students and sending them back to foreign countries. Number one, spend more. Decreasing NSF or NIH funding at the time that other countries have figured this out and are increasing is a really dumb idea. Number two, spent differently. What worked in the beginning, meaning the first couple decades after World War II, is not the same as what’s going to work now. Our organizations like the NSF was a very small, scrappy organization in the first decade or two after World War II and the same with the National Institutes of Health and so on. Now, they’ve gotten much bigger and when you get much bigger there are natural reasons you get collectively morr conservative for various reasons I talk about in “Loonshots” in some fun ways. But the not-so-fun consequence of this is that you get these structures in research, research of what could be important breakthroughs, where you have a science foundation that’s gigantic and kings in the fields and the interplay between kingmakers in fields and science foundation’s means that the kingmakers’ favorite next set of projects gets funded and the really crazy ideas, the things that the kings don’t like don’t get funded. By kingmakers I mean the biggest thought leaders at the biggest universities who the granting agencies all do whatever they say. The problem with this current structure is that we need to fund the crazy ideas that the kingmakers think are crazy, that are too crazy for the NSF or these kingmakers or the Harvard professors or the Stanford professors or whatever. It’s the guys who have these wacky ideas and you know what, if you try ten of them, nine might not work. But that tenth one might be the next version of microwave radar.
My concern is just kind of looking at the current political atmosphere. Whether it’s DARPA or it’s some sort of new agency that funds crazy ideas and nine don’t work, that there will be someone that’s saying, “there you go, look at this agency and look at how they’re wasting taxpayer money. Look, that idea it didn’t work. They spent a hundred million on that.” The focus just seems to be so sort of risk-averse. What do you think of that? That seems to me to be the environment at the moment. I’m not sure there’s the political patience for that kind of thing right now.
Well, I’m not a politician and, obviously, there’s a ton of political grandstanding. From the time that I did spend in D.C., what was surprising to me is how many times the public-facing, television-facing statements had nothing to do with what both sides would say when the cameras were off. For example, the idea of stapling a green card to every PhD, everybody wants that because it has things that appeal to both sides of the political spectrum. When you face the camera, you may say one thing but then when you get them all together, I’ve found that both sides tended to be for the most part — and, of course, there were outliers — well-intentioned people who were trying to do the right thing. They pretty much understood the facts and the ideas, and while on different extremes of the spectrum, and starting with some different value systems and some different assumptions, on many things they could agree. For example, legislating prices or legislating salaries in health care, when you take away the cameras, both sides understand that stifles innovation and we would just have fewer new drugs and we would actually all be worse off once you start heading towards a socialist or a communist system. None of those countries ever produced a lot of very innovative new drugs like we do, and that’s for a reason. People understood that when the cameras were off, and that’s what you would hear in conversations when the cameras were off, so I don’t really know how it works there now. I don’t think I’d want to know. But you made an excellent point, which is fear of failure. The point is, when the cameras are on, people can use that to score political points against each other. But, what some of the better companies do, which is very effective, is that they create signals. For example, one company I know has a day of the dead, meaning they bring out all their dead projects and they celebrate them. Now you want to be thoughtful about analyzing death, analyzing failures and your post mortems. Did they die because they were intelligent risks well taken? Or were they really stupid ideas, stupid risks that were not well thought-out? That’s not always obvious, you do need some thoughtful analysis. There are many risks that are intelligent risks worth taking. For example, if there are three lottery tickets and each one costs a dollar, but if you win you get $1,000, and you get to take one lottery ticket, of course you should take it. You have a two out of three chance of failing, but of course you would do that. You would do that all day long. It’s an intelligent risk worth taking. I don’t know how professional politicians or unprofessional ones, whichever ones we have there, can get that done in the current environment. But I do know from my discussions with folks at DARPA and other agencies there is exactly the fear that you say, that if they create a project that could have bad PR they actually kill that project, even if it’s an intelligent project. Probably a famous example is the leveraging the power of crowds or the wisdom of crowds to predict assassination attempts or terror attacks. See who’s betting in a terrorist market. That’s an example of really bad PR.
Since you brought up that, I think it was a Wall Street Journal op-ed about are consumers getting a return on government’s investment really in the development of drugs? This is what Alexandra Ocasio-Cortez has been talking about, she’s worried that the government is spending all this money but they’re not getting a return on investment. There’s a key sentence in your op-ed which I think is a real takeaway, let me just read it: “That the goal of the federal research system has always been the transfer of new knowledge and laboratory results as quickly and seamlessly as possible to private industry, which can then translate them into useful products that can boost the economy.” I mean that process is important to understand and that result. That is the return on investment, that we are getting those useful products that boost the economy or boost our health or what have you. Is that sentence not well understood by policymakers?
There are three things that people who talk about this get wrong so often and what pissed me off about that particular hearing was those three things were gotten so wrong, so blatantly, and so obviously in the span of five minutes and it just stunned me. Number one, that federal dollars pay for new drugs. No. Federal dollars pay for ideas. Here’s the difference. I have an idea in the shower for a movie. Here’s my vision: Robots take over the world. That’s an idea. Here’s the product: the movie Terminator. The distance between an idea and basic research and a finished drug is roughly the distance between me having that idea in the shower and James Cameron making the movie Terminator. It’s a huge, huge distance. So no, federal research does not pay for drugs. Federal research pays for ideas and there are lots and lots of ideas for biology and drugs just like there lots of ideas for movies and very, very few actually get turned into something useful. That’s number one. Federal dollars do not pay for drugs. Number two, that federal research turning into something commercial is a bad thing. As you just said in that sentence, that’s exactly the point of federal research. Federal research funds market failures, game-theory issues where it doesn’t make sense for any one company to invest but it does make sense for the entire society. Let’s say the invention of GPS or the internet or fusion power or nuclear power or genetic engineering. The goal of that is to create something commercial otherwise what are we doing it for? Just for fun? Number three, that the government doesn’t get any economic return. Of course it does. Once it’s created, whether it’s the biotechnology industry or the satellites that deliver GPS and it’s empowered every smartphone in the world or the internet which has enabled these trillion dollar companies. What do those companies do every year? They pay taxes, a lot of taxes. And what do those individuals who work at those companies do every year? They pay taxes. So, of course they get an economic return.
You don’t think the fact that a company has become huge and super profitable using a technology where way back down the line, the germ of that technology was supported by government, that does not place some extra responsibilities for some sort of extra action on that company beyond creating a great product and paying taxes and hiring workers? Because it seems to me what Rep. Ocasio-Cortez was saying is that then places some special burden on those companies that other companies don’t have. I’m not sure how that burden translates into how they run their business, but there’s some special burden on those companies because those routes way back were in government.
No, I would say two things here. One as a general statement, absolutely not. How many companies use the transistor? Should we tax everybody because the transistor was developed with the help of federal research? Apple makes smartphones, and Apple’s Siri — that little voice assistant that you speak into — was originally a spinoff of a DARPA project to help soldiers on battlefields get automated assistance. Should we tax every iPhone? As I say in that particular article, three-dimensional graphics was funded by the federal government, so should we be taxing Frozen? You know a little piece, a couple cents off every movie ticket goes back to the federal government? That’s exactly the same distance or idea as taxing a drug for basic biology research. I would say that’s kind of one general point.
There’s a second point that’s more subtle or not quite as obvious, which is let’s take the NIH. It has a $40 billion budget, of which $4 billion goes into national labs, but actually the vast majority of investment goes to fund research at universities and when university scientists discover something they file a patent. There’s a tech transfer office and every university has that now. Then, any company that wants to commercialize it does have to license that patent from the university and then pay a royalty. When university researchers take that next step, companies do in fact have licenses and that is an indirect benefit back to society because it’s kind of the purpose of that federal research is in one part to fund research, but in another part to train the future workforce and thinkers and doers and engineers of the country. So there is a factor that the other $36 billion of spend at the NIH anything from that, which actually ends up making it into a commercial product does in fact have a license and does in fact pay royalties. That’s also often missed in that discussion.
Just to wrap up, your core message and again — we don’t want to give the wrong impression about the book, the book goes into a lot, perhaps mostly into organizations that aren’t government but how businesses can nurture these ideas — but your closing message to a policymaker on how to make sure that the United States better nurtures ideas. What would that be? If it’s even possible to sum it up.
Three things. One, increased funding for national research, that is the various research agencies. Two, split them up smaller and smaller so you can fund the crazy ideas that the kingmakers don’t like. Three, staple a green card to the back of every PhD.
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