Why Entrepreneurs, Not Government, Drive Innovation

It’s sad that the U.S. government doesn’t fund risky research anymore.

After all, “the day before something is truly a breakthrough, it’s a crazy idea”… and if you’re not funding crazy ideas, you’re stuck with linear (incremental) thinking.

This post is about why you as an entrepreneur (or ‘exponential CEO’) are going to be solving our problems, as opposed to waiting for the government.

Why government R&D funding is declining, why that’s a bad thing, and how innovative entrepreneurs are now responsible for keeping the U.S. on the cutting edge.

Historically speaking…

Historically, government funding accelerated some of the most important technologies on which our entire global infrastructure now heavily relies: The microchip, GPS, wind energy, cancer therapies, touch screens, the Internet…

Even Google probably wouldn’t be around had it not been for government funding. In 1994, NSF, DARPA and NASA funded the Digital Library Initiative to index and sort through the growing number of websites coming online.

One of the six grants from the Digital Library Initiative went to two graduate students at Stanford — Larry Page and Sergey Brin — who would later commercialize their research and call it “Google.”

But the government doesn’t fund crazy ideas anymore…

In fact, as the data from a recent NIH Report shows, the more innovative a concept, the less funding it receives.

Figure-1: NIH evaluation score vs. proposal novelty
NIH evaluation score vs. proposal novelty.

Why does this happen?

Governments (and large corporations) have a tremendous fear of (public) failure, which leads to congressional investigations or lower stock prices. And as my friend Chris Lewicki says, “When failure is not an option, success gets really expensive!”

Here’s one of my favorite stories. Did you know that the $2.5 billion Curiosity Rover (which landed on Mars in 2011) is running a PowerPC processor that was built in 1993?


Because NASA knows it works, and they don’t “want to take a risk” with a newer processor that is unproven.

Even stranger, guess what processor the next mission “Mars Rover 2020” will use when it touches down on the surface of Mars in 2021?

Yup, you guessed it, a 1993 vintage PowerPC.

At the same time that the government is getting more and more risk averse, the amount of federal R&D dollars continues to shrink (as a percentage of the federal budget) by more than 60% over the past 50 years.

Figure-2: Federal R&D as % of total Federal Budget

Federal R&D as % of total Federal Budget

It really is a sad state of affairs.

What’s going to keep the U.S. on the innovation cutting edge?


Today’s entrepreneurs have access to technologies once only available to governments and the largest corporations: the world’s information on Google, massive computational power on Amazon Web Services (AWS), access to capital and expertise from the crowd, etc.

At the same time that entrepreneur reach has increased: the cost of launching an Internet technology startup has plummeted 1,000-fold over the past 15 years.

Figure-3: Cost of launching an Internet Tech Startup
Cost of launching an Internet tech startup.

With this democratization of entrepreneurship, we’ve seen a dramatic rise in the number of startups created and, concordantly, the number of innovative solutions to problems that we’ve been unable to solve (or even think about) until now.

And rather than shrinking (as we’ve seen in government R&D funding), private sector funding has steadily increased more than six-fold over the past 80+ years.

Companies like Google, SpaceX, IBM, Facebook, Qualcomm and countless of global startups are moving the needle forward by developing technology that solves key problems. After all, the world’s biggest problems are the world’s biggest business opportunities.

Graph - Private Sector R&D

As the Kauffman Foundation reported a few years ago, “New businesses (i.e., startups) account for nearly all net new job creation and almost 20 percent of gross job creation.”

Net Job Creation

If we can continue to incentivize and support entrepreneurs to devote their time to solving the world’s biggest problems, we will see enormous economic upside in the long run.

Bottom line: If you’re looking to make a difference in the world, you can vote, politic, fund campaigns, write grants…or you can start a company and build technology.

Image Credit: Shutterstock.com

Peter H. Diamandis, MD
Peter H. Diamandis, MDhttp://diamandis.com/
Diamandis is the founder and executive chairman of the XPRIZE Foundation, which leads the world in designing and operating large-scale incentive competitions. He is also the executive founder and director of Singularity University, a global learning and innovation community using exponential technologies to tackle the world’s biggest challenges and build a better future for all. As an entrepreneur, Diamandis has started over 20 companies in the areas of longevity, space, venture capital, and education. He is also co-founder of BOLD Capital Partners, a venture fund with $250M investing in exponential technologies. Diamandis is a New York Times Bestselling author of two books: Abundance and BOLD. He earned degrees in molecular genetics and aerospace engineering from MIT and holds an MD from Harvard Medical School. Peter’s favorite saying is “the best way to predict the future is to create it yourself.”
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