A New Route to Science Innovation

Why we should rethink how to compensate,

fund, and “own” scientific innovations.

How should this be done? Insights and

ideas from a host of sources.

Bradly Alicea

Scientific Innovation Fellow

Orthogonal Research

bradly.alicea@ieee.org

MONEY

TANGIBLE

OUTCOME

INTANGIBLE

FEATURES

Blog posts:

Gobbledygook: http://blogs.plos.org/mfenner/2012/03/27/marketing-for-scientists/

Synthetic Daisies: http://syntheticdaisies.blogspot.com/search/label/alternative-models

Set of Articles (Nature):

Nature Materials, 11 (April 2012): “One-click Science Marketing”, “The ‘M’ Word”, “The

Scientific Marketplace”.

What does a market-based economy for science look like?

* job market, competition for grants (supply-side economics).

* tangible products (protocols, code, technologies), intellectual property (must these be

privatized to be maximally beneficial?). What about intangible products?

* barriers to entry (falling? Citizen science….), strategy (imitation, cooperation, competition?)

A gentle introduction……

IP via Patent model:

Scientists, Engineers

University Administration,

Patent Attorneys Market

We own the technical

expertise, but not the

market power.

Is this innovation via rent-seeking?

Rent-seeking: extracting value (in the form of

rents) for access to patent space.

Do we need a middleman to partition markets, or

can we take smaller chunks with a higher overall

payoff?

Rent-seeking vs. value-addition: which is a better

way to characterize this relationship?

RENT-SEEKING OR

VALUE-ADDITION?

The only route to

compensating innovators?

% innovations

with payoff

Skewed towards

tangible goods

PAYOFF

PROMISE, LIMITED PAYOFF

MORE WORK

NEEDED, INTANGIBLE

Barrier to dividends:

1) significant proof-of-

concept required.

2) valuable

components become

proprietary.

3) pure science

proceeds in “fits-and-

starts”, tangential

progress.

IP via Patent Model: The Patent Problem

Steven Levy, Wired Opinion,

11/13/2012.

* patents are not only protection

for ideas, but are assets (with

intrinsic value) in and of

themselves.

* patent process is slow, difficult,

and can potentially stifle further

innovation.

Role of patents:

* True value creation (strategic

partitioning of innovation

space)?

* Largely rent-seeking

(enclosure of innovation

space)?

Barrier to dividend: amount of investment (effort, money)

needed to yield return, additional value.

ALTERNATE MODEL:

* raise money in increments (divide project into

modules).

* add value as discoveries are made (not a

linear process).

* modules and payoffs are specific to

applications, market.

Open-source ethos:

1) offer some things free (knowledge,

protocols).

2) market other things for a fee (templates,

technology design).

3) MOOC model: offer webcasts of techniques

to a wide audience (economy of scale).

Amount of work

contributed by

module #5

EXAMPLE: moving from questions to findings and technologies

Added value

contributed by

module #5

What are the options?

2) open-source models

* open to the public, versioning (drives

development forward).

* donation-driven, premium components (non-

profit foundation).

1) commercialization

* significant proof-of-concept required (must be

novel but practical).

* IP protection (proprietary), start-up potential.

What are the options?

4) X-prize style challenges

raise money (venture capital) and grand prize is

competitive.

* have fun, single winner -- end up with tangible set

of tools going forward.

3) distributed fundraising

* existing sites: Kickstarter, SciFlies, IndieGoGo.

Blog post: http://syntheticdaisies.blogspot.com

* funding window – raise x amount of dollars in n

months.

* get paid as you go. ……

IDEAS!

Social network member

i3, plus external funders

(circle at lower right)

Social network member

i6, plus external funders

(circle at lower right) How much funding is

raised within the social

network (i ϵ N) versus

from external

sources?

CROWDSOURCING: an inbred

capital market?

Change the way we do business? Or simply adapt?

Edison Dyson Pasteur

Have both a pure and applied research strategy:

* pure and applied research can potentially cross-fertilize each other.

* what is the style of famous inventors?

“I have not failed, I’ve just

found 10,000 ways that

won’t work”

“There are no such things

as applied sciences, only

applications of science”.

“Enjoy failure and learn

from it. You can never

learn from success”.

IDEA

MODEL

EXPERIMENT

UNIT OF

INVESTMENT

TEST

INVESTMENT

(crowdsourced)

APPLICATION

PROTOTYPING

FURTHER

INVESTMENT

REAL-WORLD

TESTING

VIRTUAL (THEORETICAL)

TESTING

Prototype of alternative

funding and investment

model

From conception (idea) to production and potential for

value-addition (testing)

Alternative Models of Value

How do we define “value”? Do we need an “economy of science”?

Other cultures: economic and intellectual (religious) worlds are joined at the hip.

OUTCOME: religious activities had monetary (symbolic capital) value.

Virtual Worlds (Second Life): Linden Dollars

USD (1) LindeX currency

exchange L$ (260)

Self-contained Market

Buy Land Sell Land Buy Clothing

Lesson from Shareholder Value

Shareholder value: the point of a corporation is to create value for shareholders

(investors), not to create a product per se.

* what an entity does (e.g. product development) is ancillary to the value of its assets

(usually specialized in one market niche, or as an expansionary entity).

“Down With Shareholder Value”

Joe Nocera, NYT, 8/10/2012.

Theory of shareholder value………

* if you invest in a scientific enterprise (outside of a funding

agency), what kinds of returns should you expect?

* What kind of value can be generated through

collaborations (Nash equilibrium version of a hostile

takeover)?

Prediction Markets (a.k.a. Ideas Futures)

InTrade, Iowa Prediction Markets, Hollywood Stock Exchange:

EXAMPLE: Bets of Bitcoin

Take a position (yes/no)

Pay market price

Price based on probability

of event

YES = 90% chance of event occurring,

$9.00 per security.

Use virtual currency to make trades on events.

Statement made on a real-world problem:

“Bitcoin will be exchanged for less than $13 USD at

the end of December 31st, 2012” (over finite time

window).

* weighted bet: the earlier you place winning

position, the higher your return.

Research “Strategy”

Be careful, this is NOT what is sounds like (nor a trick question)….

What questions do you ask? What kind of approaches do you pursue?

* things that are similar to the community standard, or cutting-edge, “out there”

questions?

Do you compete with other labs, or collaborate closely?

Are you an imitator (pure strategy), or an innovator (mixed strategy)?

* some of these choices are a consequence of the scientific infrastructure (previous

training, journal expectations, access to data and tools).

x, y, z x, y, z

x, y, z x, y, z

IMITATOR

INNOVATOR

COMPETE COLLABORATE

Becomes an m-strategy (4),

n-player (3) game,

Production of Pens

(cost/unit)

Production of Tablet

PCs (cost/unit)

Educational/research

Infrastructure (cost/unit)

What it enables (information/

value transformation)

What it enables (information/

value transformation)

What it enables (information/

value transformation)

MODEL OF INTANGIBLE VALUE (VALUE TRANSFORMATION)

Anthropological Models of Value (defined by cultural change)

Transformity (energy and information)

Value Transformation

How do you make your research area

“robust” (as a market)?

Investment Bubbles: two examples

Housing “bubble” = massive overvaluation of price per unit, unit is highly tangible (easy to

assess true value).

* bursting of bubble results in an unstable price trajectory (severe overshoot, undershoot in

prices).

Education “bubble” = massive increase in tuition rates, is this overvaluation (per unit)? Unit is

highly intangible (harder to assess true value).

* bursting of bubble results in a more robust price trajectory (some deflation, but slower and

easier for market to adapt).

So what is the secret recipe?

* a few big investors, or many small investors?

* is there a market for “promise”? See Facebook,

IPO offerings…..

* advertising drives Google’s profitability – is a

side business required?

* will “distributed funding sources” = a sufficient

budget?

Is “proprietary science” at odds with the

collaboration culture of modern science?

* can we adapt an “open source foundation”

model for knowledge generation, access to

data?