This post examines government’s role in spurring innovation by discussing three books: Mariana Mazzucato’s The Entrepreneurial State, Peter Thiel’s Zero to One, and Steven Johnson’s Where Good Ideas Come From.

Mazzucato’s Argument

Contrary to viewing government as an impediment, Mazzucato demonstrates how U.S. government investment has driven innovation across sectors. While she sometimes overstates connections between government funding and commercial success, her point about SBIR grants supporting companies developing government-needed technology with later commercial applications is well-taken.

Venture Capital vs. Patient Capital

There’s a fundamental tension: venture capitalists operate on ~10-year horizons, making long-term, uncertain investments (like cleantech) problematic. Government can provide “patient capital” pursuing specific goals like clean energy development without immediate profit requirements—something private markets struggle to sustain.

Innovation Pace

While Thiel attributes slowing pharmaceutical innovation to regulation, I’d argue we’ve exhausted “low hanging fruit.” Johnson’s concept of the “adjacent possible” suggests we’re awaiting conditions for the next innovation wave. Complex problems like personalized cancer treatments require foundational work before breakthroughs emerge.

Government’s Broader Role

Beyond direct research funding, government can facilitate university-to-industry knowledge transfer, encourage corporate collaboration on difficult problems, and support technological incubators in cities.