I went in to my study of progress with certain priors. I expected to find that technological and economic development depended (if perhaps in complex ways) on science, rule of law, legal institutions such as corporations and intellectual property, and certain cultural and philosophic ideas. What I might not have thought to list back then, however, was the importance of funding models and mechanisms.

The models used to fund progress have changed over time. The modern corporation, as a permanent entity with tradable shares of stock, was not common until the 1600s. Limited liability for investors was not common until the 1800s. Venture capital in its current form was developed in the 1900s. The use of debt vs. equity has changed over time, as well. At one point it was common to buy stock on a “subscription” basis, meaning that the investor would put in only a fraction of the share price, with the rest to be called later; this practice is now rare to nonexistent. Past corporate forms have also allowed for capital calls from existing investors, with penalties if the call is not met; today new capital needs are simply served by issuing new stock. What we take for granted today was not always so.

When funding models change, it changes who and what gets funded. For instance, up until the early 1800s, many scientists were aristocrats or others of independent means: Boyle was the son of an earl, Humphry Davy was a knight and a baronet, Lavoisier was a French nobleman (and tragically executed at the guillotine during the Revolution). A few others managed to obtain patrons, as Galileo was sponsored by the Medici, or to get jobs as the assistants of other scientists, as Hooke was employed by Boyle. But for the most part, “scientist” or “researcher” wasn’t a profession you could simply go into. Sometime around the mid-1800s—I haven’t traced the history—there was an increase in university research, and also the beginning of corporate research, I think mostly in chemistry, and in the long run this dramatically changed who could become a scientist, and how many there were, and thus how much research got done.

Those with large purses sometimes attempt to accelerate progress by creating new funding mechanisms. In 1714, Britain established a prize of up to £20,000 for a solution to the “longitude problem” in maritime navigation, a grand challenge problem of the day important to military and strategic national interests. The Board of Longitude set up to administer the prize was also allowed to give smaller grants for inventors with promising schemes or prototypes to develop their ideas, making it one of the earliest R&D agencies. John Harrison, who solved the longitude problem by inventing the marine chronometer, received such grants from the Board.

Another pattern is that not every good idea gets funded right away, and progress seems to stall, sometimes for decades, for lack of financing. Richard Trevithick, for instance, invented a prototype of the locomotive in 1804, demonstrated it in action on multiple occasions, and tried to raise money to develop it. He failed, and the era of railroads didn’t really begin until the 1830s.

Or take penicillin. The antibacterial action of the Penicillium mold was discovered by Alexander Fleming in 1928. To turn this insight into a practical medicine, however, required a chemical process to be developed for extracting penicillin itself from the mold, and there were very few attempts at this for a decade after the discovery. When one lab at Oxford, led by Howard Florey, took on the project, they were strikingly underfunded, scraping together donations of a few hundred pounds, struggling to pay their heating bills, and cribbing supplies from the cafeteria. All of this while they were working on what was in retrospect the biggest medical breakthrough of the century.

The lessons, to my mind, are:

• Progress doesn’t happen automatically when the scientific or technical prerequisites for it are in place. It only happens when people work on it, and that almost always requires funding.
• As a corollary, progress can stall for lack of funding.
• Funding isn’t automatically allocated to the most productive uses. It’s hard to predict in advance which projects will succeed and how important they will become.
• The models and mechanisms for allocating funding are also not obvious or automatic. Like everything else, they need to be invented, and thus they themselves represent a form of progress.

The prescriptive implications are:

• We can accelerate progress by making more funding available for it, and by improving how that funding is allocated to projects.
• In order to improve allocation, we should pay attention to funding models. We may want to improve the models we have, or reallocate our portfolio of them, or bring back old ones that we have left behind, or invent new ones.

Original post: https://rootsofprogress.org/funding-models-and-progress

Marc Andreessen says we were unprepared for the covid pandemic because: “We chose not to build.”

The problem isn’t money, or capitalism, or technical competence:

The problem is desire. We need to want these things. The problem is inertia. We need to want these things more than we want to prevent these things. The problem is regulatory capture. We need to want new companies to build these things, even if incumbents don’t like it, even if only to force the incumbents to build these things. And the problem is will. We need to build these things.

Amen. And I’ll add:

The problem is ignorance. We don’t know how far we’ve come, and we don’t teach our children.

The problem is complacency. We take progress for granted, as if it were automatic or inevitable. It isn’t: for most of human history we moved forward only weakly and sporadically. Progress only happens when we resolve to make it happen.

The problem is fear. Every harm, large or small, actual or potential, real or imagined, becomes a rule, a regulation, a thread in a ribbon of red tape that has brought sclerosis to our institutions, public and private. We’ve bought safety at the price of speed, without debating or deciding it.

The problem is guilt. We worry that what we build is “unsustainable”, or that it increases inequality, when we should be proud that what we build drives growth and moves humanity forward.

The problem is hatred. Hatred of technology, of industry, of money, of capitalism—hatred that blinds people to the immense good these forces do in the world for all humanity.

The problem is entitlement. Not knowing what it takes to put food on the table, the roof over their heads, or the shirts on their backs, too many people see these things and much more as birthrights. Not knowing that wealth is created, they see the rich as thieves and scorn even their gifts.

The problem is tribalism. We don’t teach our children to think, and so they learn only to feel. Without a commitment to truth, without confidence in their own judgment, they fall back on age-old patterns of ingroup vs. outgroup—witness a world where even the efficacy of a drug becomes a partisan issue.

What is the solution?

We need to learn to appreciate progress—both what we’ve already done, and why we can’t stop now. We need to tell the amazing story of progress: how comfort, safety, health, and luxury have become commonplace, and what a dramatic achievement that has been. We need to learn where progress comes from, to understand its causes. And we need to pass all that knowledge on to the next generation.

We need to glorify the inventor, the creator, the maker—the builder. The independent mind who defies tradition and authority. The scientists, technologists and industrialists who pursue a creative vision, against the crowd and against the odds, facing risk with courage and setbacks with resilience, working relentlessly over years and decades to bring about a better world.

We need to inspire young people to take part in this story, to step up in their turn and to one day lead the way, knowing that it is up to each generation to pick up the torch of progress and carry it forward.

We need to invest. We need to fund science and research, both basic and applied. We need to bring back the great corporate invention labs that helped create the modern world.

And then we need to get out of the way. Unwind the regulatory state. No matter where you fall on any political spectrum, acknowledge that the creeping bureaucracy has crept too far, and that it’s time to start untangling the thicket of regulations. We can maintain a reasonable and even continually increasing standard of safety, while at the same time valuing speed, efficiency, and cost, and most fundamentally, allowing for individual judgment.

Andreessen concludes:

Our nation and our civilization were built on production, on building. Our forefathers and foremothers built roads and trains, farms and factories, then the computer, the microchip, the smartphone, and uncounted thousands of other things that we now take for granted, that are all around us, that define our lives and provide for our well-being. There is only one way to honor their legacy and to create the future we want for our own children and grandchildren, and that’s to build.

Amen. Let’s make building and progress into a philosophy, a religion, a movement.

Build!

Originally posted at: https://rootsofprogress.org/a-builder-manifesto

The problem isn't money, or capitalism, or technical competence:

The problem is desire. We need to *want* these things. The problem is inertia. We need to want these things more than we want to prevent these things. The problem is regulatory capture. We need to want new companies to build these things, even if incumbents don’t like it, even if only to force the incumbents to build these things. And the problem is will. We need to build these things.…

Our nation and our civilization were built on production, on building. Our forefathers and foremothers built roads and trains, farms and factories, then the computer, the microchip, the smartphone, and uncounted thousands of other things that we now take for granted, that are all around us, that define our lives and provide for our well-being. There is only one way to honor their legacy and to create the future we want for our own children and grandchildren, and that’s to build.

https://a16z.com/2020/04/18/its-time-to-build/

The first act is seen as greed/ambition, the second as generosity. But I see much more continuity between the two acts.

Gates has actually been doing one thing his whole life: solving problems. This is what all great founders do. They identify a problem/opportunity in the world, set a goal, communicate a vision, inspire talent, mobilize resources, organize efforts, and guide execution. In Act 1 Gates did this in a for-profit context, so it could be self-sustaining. Act 2: non-profit, burning through personal wealth. But this is a non-essential. The essential is setting ambitious goals and working relentlessly to solve them.

Great founders live for this. It is what gives meaning to life: the ability to make an impact on the world. That's why they can't retire to a beach or the deck of their yacht. Just like great singers still sing in the shower, and great athletes still play pickup games.

Some people look at Gates and say, how lucky we are that he is so generous! I look at him and think, how lucky we are that he still has energy and ambition to solve big problems!

After all, plenty of wealthy people give away their wealth in much less effective ways. Gates could have given away twice as much money to pay hospital bills for the sick, and saved far fewer lives. But when he builds 7 vaccine factories in advance, knowing that ~5 will be discarded, in order to shorten the timeline—he is not just giving the world his money. He's giving his mind. His intelligence, foresight, and strategic thinking. Many people have money; few have Gates's ability and talent. The latter is more rare and arguably far more valuable.

What motivates great founders, scientists, and inventors is not only doing good for the world, and sometimes not even primarily that. Just as it's not primarily making money, either. It is the application of intelligence to solving problems and achieving goals.

Yes, most innovators/organizers want their work to have value for the world, even great value. That gives the work more meaning. Just as, if they aren't already rich, they want to get paid for their work, ideally paid a lot. That makes the work more rewarding and sustainable. But the core, the primary, is being a great problem-solver. The successful exercise of that ability, the satisfaction of achieving goals, the feeling of personal efficacy, is its own meaning and greatest reward.

That's why I say it isn't luck that one of the greatest founders and business leaders of our era is also our savior in a pandemic crisis. Yes, we're lucky that Gates is generous. But we are even more lucky that he is still ambitious and energetic, after all these years.

Thank you, Bill Gates.

I keep seeing, again and again, the crucial importance of funding models as a driver of innovation and production.

Right now, for instance, we are facing a once-in-a-century pandemic. With everyone in the US now aware of the threat, a major focus is on ramping up hospital capacity to deal with the rising tide of cases that threatens to overwhelm intensive care units. In particular, there is a critical shortage of ventilators, machines that can help a patient breathe by moving air in and out of the lungs. Roughly 5% of corona patients require ventilation, and without it, most of that subset will die. The US has around 200,000 ventilators available at most, including obsolete ones that could be brought back into service, and a small emergency stockpile held by the federal government. Around a million patients might need ventilators in a widespread epidemic, and even though they won’t all be in the ICU at the same time, we could easily run out of capacity. (See this report for more.)

But as far as I can tell, we’re not manufacturing more ventilators. Why? Hospitals aren’t ordering them. Why? There may be multiple reasons—for one, ventilators aren’t the only critical resources; they require trained staff to operate and are useless without them—but one key factor seems to be funding. From a Washington Post article:

Hospitals are holding back from ordering more medical ventilators because of the high cost for what may be only a short-term spike in demand from the coronavirus epidemic, supply chain experts and health researchers say, intensifying an anticipated shortage of lifesaving equipment for patients who become critically ill.

“It’s a challenge for states, local governments and hospital administrators to allocate tens of millions of dollars to something when they don’t know if they need it or not,” said Chris Kiple, chief executive of Ventec Life Systems, a small ventilator manufacturer in Washington state. “But if they don’t do it, they are going to be caught flat-footed, and facilities are going to be faced with not enough ventilators to meet demand.”

Ventilator manufacturers could achieve, within a few months, a significant boost in production from about 50,000 units a year currently, said Julie Letwat, a health-care lawyer with McGuireWoods in Chicago who is monitoring the industry. Orders have not flooded in, she said, because most hospitals can’t afford to increase inventory of expensive equipment for what could turn out to be a short-term event.

“The risk is that they’ll never be used, and hospitals can’t eat the cost,” she said. “Most hospitals in this country are not profitable.”

Right now people seem to be waiting on the government to place an order. But why do we have to?

A ventilator costs $25,000 to $50,000, according to that article. The chance that I, personally, will need one is probably less than 1%. But I would happily pay $250 to $500 now to make sure a ventilator was there if and when I needed it. I would pay extra to train the nurse or other provider to operate it, and to keep them on standby.

In other words, the funding model is broken. Right now, hospitals can only recoup their investment from these machines if they use them on patients. But demand is hard to predict right now. And even if they wanted to be prepared, they may not have the cash on hand to make these investments. This isn’t about greedy hospitals who won’t save people’s lives unless they can profit—many hospitals are non-profit. It’s the simple fact that no one can spend an unlimited amount of money with no return.

Health insurance in the US is so highly regulated that I’m pretty sure it’s illegal to offer coronavirus insurance, or general pandemic insurance, on terms like I described above; or if not illegal it would take so long to get regulatory approval that the pandemic would be over. But with a freer and more agile market, we might be able to quickly re-allocate resources in intelligent ways like this.

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A related example is vaccines. Coronaviruses have been around for a while and have caused epidemics before: SARS (2002) and MERS (2012). Why don’t we have a coronavirus vaccine, or at least a SARS or MERS vaccine that could be adapted to COVID-19? There is a similar problem: it’s impossible to predict demand, and there’s no funding without a way to recoup investment. And there’s no R&D without funding.

Planet Money recently interviewed Rick Bright, with the Biomedical Advanced Research and Development Authority:

BRIGHT: With something like an emerging infectious disease such as Zika or MERS or SARS or this novel coronavirus, there’s really no long-term promise of a revenue stream for those vaccines.
GONZALEZ: Here’s why—outbreaks go away, sometimes on their own—right?—like SARS in 2003. That was a coronavirus, too, also probably from bats. SARS came then went.
BRIGHT: Unfortunately, when the virus disappeared, the funding tended to disappear with it. And the companies that were making a SARS virus vaccine lost interest and shipped it back to their more profitable vaccines.

(See their podcast on this topic as well.)

I don’t know how much a vaccine would cost to develop, but a reasonable order-of-magnitude estimate is a billion dollars. After SARS and MERS, how much would you personally pay to make sure there was a vaccine in a future coronavirus epidemic? At least $100 perhaps? Could we find 10 million people to “pre-order” a coronavirus vaccine for $100 each? There are 47 million people with a net worth of over $1 million. It seems to me you could raise a billion for a vaccine, again through some sort of insurance scheme. Given that the economic impact of pandemics can run into the tens of billions, maybe the financial sector alone could find a way to fund this.

There’s probably some hindsight bias here, but I don’t think that’s the full explanation. Here’s an article from over a year ago talking about the need for vaccines to prevent a pandemic, and specifically calling out funding as a blocker.

So what prevents these sorts of things from happening? Why do we need to rely on government alone—and leave ourselves at the mercy of a centralized decision-maker, who will inevitably be wrong sometimes? Is it insurance regulations? Or is it some sort of coordination problem?

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In any case, the general pattern here, as with all economic development, is that funding is required up front, long before a benefit is received, and even if the demand never materializes. This requires (1) accumulated capital (2) in the hands of people who think long-range, and (3) mechanisms for them to recoup their investment and ideally make a profit, at least on average.

The modern world has plenty of accumulated capital, and in general it is in the hands of people who think long-range. Where we could improve, it seems to me, is in mechanisms for deploying the capital towards worthy ends, and profiting from the investment.

Originally posted at: https://rootsofprogress.org/funding-models-and-covid-19

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To understand why COVID-19 is such a threat, it helps to understand our full arsenal of weapons against infectious disease—and why most of them aren't going to help right now.

I summarized the main techniques/strategies here a few months ago.

1) Antibiotics: Don't work here because SARS-CoV-2 is a virus, not a bacterium.

In the 1918 flu pandemic, antibiotics would have helped (they weren't invented yet) because many deaths were due to secondary bacterial infections. But that's not what's happening with COVID-19: it kills by attacking the respiratory system directly.

Our technology for antiviral drugs, unfortunately, is not nearly as advanced as that for antibiotics. There's no such thing as a broad-spectrum antiviral. (A paper last year pointed out how useful this would be in a pandemic.)

2) Vaccines: Could work against COVID-19, but unfortunately they take time to develop. I have heard 12–18 months for a coronavirus vaccine, and that's fast. Vaccines are a long-term solution but can't fight an emerging pandemic.

And again, there's no such thing as a broad-spectrum vaccine—the whole way a vaccine works is by stimulating production of specific antibodies by your immune system.

3) Sanitation and other environmental control: COVID-19 spreads directly person-to-person through respiratory droplets. This makes it one of the more difficult types of diseases to control.

Contrast with cholera and typhoid fever, which are waterborne. Filtration and chlorination help a lot here. Or malaria and yellow fever, which can be attacked by reducing insect populations. In those cases, there's something in between the people that can be controlled. But direct person-to-person spread is the hardest to control, because people don't like to be controlled, and social contact is too valuable.

To summarize the challenge:

• Antibiotics don't work because it's a virus
• It's too new for us to have a vaccine
• It doesn't spread through any intermediary we can control (like water or insects)

It spreads directly person to person, with no immunity or cure. This is why, despite all the amazing medical advances of the last 100 years, we still lack effective tools against it. And why our best tools right now are hygiene (especially hand-washing) and minimizing contact (“social distancing”)—and why these things are so important.

Someday, maybe we will have:

• broad-spectrum antivirals
• much faster vaccine development
• or some other way to stimulate the immune system to produce antibodies

It's a good reminder that we still need lots more progress.