Transcriber: Lieu Le Reviewer: Maria Pericleous
I’m going to put my cards on the table.
I’m an optimist.
I think that people are generally good,
and I think that things are generally good,
and even more, I think that things get better over time.
And I also think history is with me on that.
Human creativity and hard work have always led to a better future.
I suspect most people working in science and technology and innovation
are also optimists.
Today we have better health, longer life, more interesting work,
and more leisure time than ever.
The Industrial Revolution moved us from survival mode to enjoyment mode.
Today we spend less of our time working to survive.
I mean, growing food and taking care of ourselves.
And therefore, we have more time to spend on other pursuits,
like being healthy, being happy, being social
and doing interesting work and projects that we think make a better future.
The superpower of humankind is our ability to communicate
and to collaborate and to share ideas and resources
and therefore prosper together.
No other creature does that on our scale,
and we’ve been doing it for hundreds of years,
and we keep going.
Today we have the next revolution, one of information.
It’s moving people even further forward,
but to what?
As they say,
predictions are difficult to make,
especially about the future.
So I won’t try that.
We can’t see the future from where we stand today.
But science fiction writers like to imagine it,
and they get a lot right.
When I was a kid, I liked to watch Star Trek on TV with my dad
and we would dream what it could be like to have a personal communicator.
It's life, Jim, but not as we know it.
Well, I don't know about you, but that is my life today.
I mean, it’s not an urgent communication from the planet above,
it’s normally my wife,
asking, “when are you coming home from the office?”
and “are you bringing any sushi with you?”
(Laughter)
So we can communicate and collaborate
on a scale that was unthinkable just a very short time ago.
Well, I believe we can also solve problems
on a scale that was unthinkable just a short time ago.
OK, I’m an optimist, but I believe that if we choose to,
we can solve the big problems,
like poverty, like climate, like disease,
and other major problems in the world today.
It’s a question of how we apply our time and our effort and our money.
It’s easy, straightforward, to make improvements,
small improvements to things that we already have,
but it’s much harder to develop and distribute the big innovations.
And one problem is that big innovations,
they run counter to our conventional wisdom.
And just a few examples of crazy ideas.
What about injecting a small virus into yourself,
to protect you against the future,
crazy idea?
What about running a high speed wire into every house and every company,
so computers can talk to each other?
What about fitting a computer in your pocket?
What about putting satellites around the world
to broadcast location data?
And on and on, genome mapping, personalized medicine.
And what’s Artificial Intelligence anyway?
Another problem is that, while we can imagine the future today,
to bring ideas into common use,
we have to spend a lot of effort and resources.
As William Gibson, the science fiction writer, wrote,
“The future is already here, it’s just not evenly distributed”.
But the problem I’d like to focus on is a human one.
Funding the future requires normal people
to do things that do not come normally to us.
It requires a leap of faith.
We have to spend time and money and effort
on ideas and projects which may or may not work.
They are unknown outcomes.
But if they do work, that will be amazing.
We know enough about how innovation works,
to observe that funding the future
means spending money, and good money, on people and projects
with unknown outcomes and things of unknown value.
Things that they seem downright stupid or wasteful at the start.
Do you know anyone who does this naturally?
What about kids?
Well, they call it play.
And what about artists?
Well, they call it creativity.
And scientists?
They call it the scientific method.
Some people are kind of like investors.
They try lots of things to find what works.
Or as I’m used to saying, they take a portfolio approach,
and the ones that tend to iterate faster and cheaper
also tend to find more success.
And science is full of specific examples.
Sir Alexander Fleming, a Scottish researcher,
invented penicillin in 1928,
but he was actually experimenting with the influenza virus
and he discovered antibiotics, yay!
Thomas Edison was one of the greatest innovators in modern America.
He pioneered a method of technological research.
He’s generally credited with inventing the light bulb
and making major contributions to telecoms and motion pictures
and all sorts of other things.
He famously said of his own experiments,
“I have not failed 10,000 times.
I have been successful in finding 10,000 things that don’t work”.
And, more recently, Sir Tim Berners-Lee.
He was looking for a better way to archive and share documents
in the scientific community
and he invented the World Wide Web.
And he actually said, “creating the Web was really an act of desperation,
because the situation without it was very difficult.”
And business is full of lots of examples, too.
Disney was not the first company that Walt founded.
Microsoft was not the first company that Bill Gates founded.
Richard Branson and Stelios Haji-Ioannou
are quick to talk about all their failed companies,
and what they learned from them.
But we tend to remember the ones that worked.
So I believe that we can, and we should,
spend a certain amount of our collective capital on the future.
I’m building the future, which by definition means
funding unproven products and people and teams.
That kind of investing is the basis of venture capital.
Let’s fund projects that might work, and they might not,
but if they do work, they’ll create a big improvement and outcome.
We accept failure as part of that model,
so long as the gains of the success
pay for the losses of the things that didn’t work.
So to give you a sense for how we think about it and plan it,
most venture capital investors expected
something like a third of projects will fail completely.
They just won’t work.
And something like a third will do something,
but they won’t fulfill the original promise.
But the other third will be incredible,
and create lots of value
and that will compensate us for all the projects.
The trouble is, at the beginning
we don’t know which one will be the big one.
So that means every project we try must have the potential
to be something really big and change the world,
because we don’t know at the start which one will make it.
For more than a decade, we’ve had a boom
of venture capital and innovation.
Information technology has networked the world,
further extending our human super skill of collaboration,
for tasks that are bigger than the individual.
And that has, in turn,
led to the democratisation of ideas and methods
and the means of production and the means of distribution of digital products.
When I was starting my career in tech, if you wanted to do a software project
you had to buy computers and build a data center
and rent a really expensive telecoms line,
a lot of money.
Nobody does that today.
Today we have an abundance of free tools.
We have Dropbox to store things, we have GitHub to develop things,
we have app stores to distribute things.
we have YouTube and Tiktok to share videos of cats playing pianos.
(Laughter)
By the way, when I looked up cats playing pianos,
I got an advertisement for software development tools.
So it's all kind of connected.
The decreasing cost of production and distribution
means that big ideas
have a lower barrier to entry into the world and the market than ever.
And that is so exciting.
It means that wannabe entrepreneurs
can try their idea faster and cheaper than ever before.
And customers, wannabe customers,
can buy those products, cheaper and faster than ever before,
both consumers and companies.
We can all try things,
and that’s a big part of the recipe for real innovation success.
Think about that, the next time you buy something.
What innovative experiments am I helping, through this purchase?
Of course, there can also be negative effects
of lowered barriers to entry,
most notably competition, consolidation and globalization.
The world gets flatter, so ideas compete in a bigger marketplace,
and therefore ideas from far away can have a local impact,
a local economic impact, especially on outdated sectors or local economies.
That’s been happening for a long time, it’s not new,
but it seems to have accelerated over the last few decades.
I think there’s a growing understanding that we need to take care actively,
not to leave some people behind.
When Adam Smith's invisible hand moves more quickly, it also moves more brutally.
In my lifetime, there's already been great creative disruption.
People, communities and societies have been left behind,
and others have not yet been lifted up.
With great growth can come great inequality,
and positive trends can have negative, unhealthy effects.
We need to do better
and to be more active, engaged participants
in innovation and development.
Although please don’t mistake that for a request for more regulation,
or more protectionism.
Those are blunt and damaging tools
when they’re not used very carefully and very sparingly.
So, the beauty of today’s information revolution
is that we can all participate.
The historic low cost to enter
is not much more than a computer and network access,
and the network provides free education, free distribution, free development.
But time to participate still costs money,
and time to scale those those ideas and projects and companies
cost a lot of money.
So to unlock the real potential of today's revolution
and hidden talent everywhere,
we need to invest in our own future.
This is difficult, not least because investors
are trained to place their bets on patterns that they recognize.
In other words, they use the large pools of capital in the world,
they use the past performance to predict the future,
as their main analysis.
What else can they use?
But that may not work as well
for investing in an innovation future, an unknown future.
So I’m arguing that some small parts of all of our capital
should be put to work building a better future.
And a lot of that happens already,
governments, universities, foundations and many others
fund research and development every day.
But much more is needed,
especially to help that entrepreneur who has a big idea,
and some technology to leverage it.
But to unlock that,
we need to first recognize our own built-in bias
and how that's a block to innovation.
Funding the future requires becoming comfortable with the unknown,
on a personal level and on an organizational level.
Even worse, as I already said,
it means spending money and time on things that might not work.
So what kind of crazy person spends really good time and money
on a person or a product or a team
that is untested, that might not work.
Well, I do.
(Laughter)
And there's a whole industry of people who do that,
and they've built some good companies.
The car you want, the phone you have, the software you use,
all venture capital backed.
So to fund the future, we must consider unknown ideas, unknown products,
unknown business models, unknown customer appetites,
and willingness to pay for things,
competition, lots of stuff.
And there are even more hurdles to this kind of investing.
Counterintuitive thinking is required to overcome our key human instincts.
For example, failure is not bad.
Remember Thomas Edison, and his 10,000 things that he tried?
You have to kill projects.
You have to work hard on projects, but you also have to stop them
when they’re not working,
and be intellectually honest about that.
You have to try many projects or, in investor language, diversify.
A portfolio of big ideas will likely win
over putting all your efforts into a few opportunities.
Or, to say it simply, don’t put all your eggs in one basket.
And being incorrect is part of the journey to success.
Innovation investors must be comfortable with it and plan for it.
More important is to learn, to iterate and course-correct.
And finally, ambition.
You’ve got to work on big, crazy ideas,
because targeting these large outcomes is critical.
If you don’t aim for the sky, you’re surely never going to hit it.
So to give you an example of an organisation
that has built a systematic programme to fund the future.
I’m fortunate to work with the RAG Foundation in Essen, Germany.
As the front page of this large independent foundation says,
“Founding the future is a perpetual obligation.”
RAG Foundation’s roots lie in the coal mining industry
and its mission is to generate investment returns
that finance obligations that the German coal mining industry left behind.
They also work to actively transform the region’s economy
by promoting projects in education and culture and science.
The initiatives undertaken by RAG
are varied in structure and targets and methods,
but they’re all carefully designed to create a positive economic outcome,
and also a positive outcome for society,
a positive impact.
How the foundation was built and how the organisation is working
could be the subject of a whole other talk.
So I’ll simply observe that it is a remarkable achievement
to turn a declining industry into a positive force for the future.
There are other great examples like RAG Stiftung, however,
this is an area where, unfortunately, Europe is lagging behind the US.
Europe has great technology, great talent
and over a decade of great venture capital returns.
Yet, the market is growing quickly, but remains immature.
Funding the future is difficult.
It means taking some risks and dealing with costs and complexity.
And there's always a reason not to participate.
Today, governments fund about 30% of European venture capital.
However, our collective savings for the future
I mean pension funds, don’t really participate in a meaningful way.
According to data from the European Data Collective
in 2020, about 0.018% of pension assets
were allocated to venture capital.
That’s about 700 million out of €3 trillion.
That figure was actually matched by pension funds, not from Europe.
So what are those foreign investors seeing in our own market
that we don’t see?
Or do they just have organizations better equipped to fund the future?
This is a problem I sincerely hope we can solve in Europe.
And I’m encouraged by a growing awareness and interest
in venture capital and private markets generally.
We’re playing catch up, but we’re moving very quickly
and the evidence of success is clear.
I saw in the financial newspaper in the Netherlands
that a pension fund investing €100 in 2001
in the listed markets grew to €418.
over a 20 year period,
The same hundred euros invested in private markets
grew to three times as much.
Funding the future is really difficult.
But there are very strong economic and societal gains
for those available,
and having the courage to do difficult things.
Thank you.
(Applause)