70: The Economics of Innovation with Matt Clancy

Matt is a writer, researcher, and educator on the economics of innovation at Iowa State University, and a progress studies fellow at Emergent Ventures at the Mercatus Center. In this episode, we talk about innovation, remote work, and speeding up technological progress. You can check out Matt's current project, at https://www.newthingsunderthesun.com/

Transcript:
Unknown Speaker 0:05

Hey folks,

William Jarvis 0:06

welcome to narratives. narratives is a podcast exploring the ways in which the world is better than in the past, the ways that is worse in the past towards a better, more definite vision of the future.

I'm your host, William Jarvis. And I want to thank you for taking the time out of your day to listen to this episode. I hope you enjoy it. You can find show notes, transcripts and videos

Will Jarvis 0:31

at narratives podcast.com. Well, Matt, how are you doing today? I'm good, thanks. Awesome. Well, Matt, thank you so much for hopping on. Before we hopped in to some of these questions I've got, can you give us a quick bio and some of the big ideas you're interested in?

Matt Clancy 0:58

Sure. So I'm Matt Clancy. I teach economics of innovation and just sort of general economics classes at Iowa State University. I work on a couple other projects there too. Before that I was. I was a research economist at the Department of Agriculture. That was my first job after my PhD. And I worked on science policy issues, kind of the big project that I'm working on these days is called new things under the sun. And I got funding from emergent ventures, I'm a technically called, like a progress studies fellow. And that project is a, I call it a living literature review of social science research related to innovation. And it's it's sort of a website, but it started as a newsletter. And it's a, it tries to sort of synthesize recent research about innovation to sort of tackle a very narrow, specific claim with a lot of evidence and make it accessible to anyone. So that's, that's what I work on. And, yeah, I'm sure I'll talk more about it. But that's, that's me. And I live in Iowa. That's awesome. That's

Will Jarvis 1:59

awesome. So I'm curious, you know, you've read a lot of I'm assuming you probably read more than just about anybody else on the literature we have about innovation. But you know, what's your feeling? how good of a grasp Do you think humanity has on the subject right now? And yeah, like, like, How confident are you that we understand it pretty well? Or do we not understand it? Well, at all?

Matt Clancy 2:22

Yeah. So what you said about like, I've read a bunch. It's weird, because like, from my perspective, like, you know, it's like, I've got like a sliver of it. But anyway, because it's just fast. And that's one reason I started the project is like, how is anyone going to keep track of all this is like a firehose of new stuff that comes out all the time. So anyway, I have read a lot of it. It's, that's one of the perks of this running that website, is that you that sort of your day job, or at least it's not, it's not my full time thing. I do teach and other stuff, too. So what do we know? I mean, we know more than people, I think, appreciate and know, is sort of this provisional scientific sense of the word like, everything is always contested. We're still this is like social sciences and social sciences have like, I don't know, a rockier reputation in the last 10 years, like with the replication crisis, I think that we know more than sort of science skeptics who really dig into that replication crisis, I think, because those are, I think you can identify suites of studies that are mutually reinforcing, and like, implicit replications, and stuff. But you know, at the end of the day, this is not like the hard sciences. So we don't know how to fly to the moon with this stuff. We know how, like, it's better than anecdotes, like, which is what would normally kind of guide policy. But I think it's it's sort of well short of what the heart what a lot of the hard sciences figured out and actually like figuring out why, why that's the case is one of the questions I'm interested in, like, if you know, the pathologies of the social sciences, are they widespread? And if so why not? What's special about the social sciences? And I guess more generally, some other since you asked what questions I'm interested in, like, I think I've always been interested in what I call, like the micro foundations of innovation. So what's really going on under the surface when new ideas or new discoveries are made and the processes they come about? related to that is sort of the future of innovation, like, Is it going to be harder, slower? And if so what can we do about it? And then I guess the sort of nice thing is I got kind of lucky in my timing on this, but I started to get interested in the impact of remote work, and the potential of remote work about a year and a half, probably about a year before COVID struck. And so I had been digging into that literature, and I've written a bit about that too, and especially its impact on innovation. Very cool. Very cool.

Will Jarvis 4:47

Well, I'm, I'm curious. I've wondered about the replication crisis. I I've got a lot of questions. But I'm curious the replication crisis in psychology. You know, it starts in psychology for And I've always wondered, you know, is this, I have this suspicion that it's probably a lot more pervasive than we think. But it's just easy to see. And like social psychology, like, you know, anyone can read a social psychology paper and think, okay, and like, and like kind of like grok it if that makes sense. But, you know, maybe as things are kind of farther out farther out, in some sense beyond like, I guess anyone's domain, it would be harder to see it. What do you think about the replication prices?

Matt Clancy 5:31

Yeah, so I think, you know, I think the replication crisis, what you say is true like that, it's easier to sort of understand some of these studies that are almost about like our, our day to day experience. And we have, like, we know what it's like to be people in social environments. We don't know what it's like to be Adams. But like, one thing I always sort of hedge back about the replication crisis is like, you know, the replication crisis is famously like, the majority of studies in certain domains don't replicate. Like, when they did this experiment, where they tried to replicate 100 of them. I think it was, like 70%, or something weren't replicated. Yeah. But you there's like a limit on how widespread that can be. Just because if you like, look around, we have things like mRNA vaccines, we've got like, like, we do things that work we have, like technology is like a proof of concept that these things are replicated, because the process is replicated every time someone uses the technology. And I think that like in the social sciences, there are fields that are better and worse than others. Economics, I am an economist. So like, take this with a grain of salt. But I think economics has a reputation for being good at this, like there's like, it's not just my assertion. And I think it's still not as good as the hard sciences. But like, among social sciences, like there's been an experiment where they not an experiment, they've done, like, betting markets on whether things will replicate. And so based on people's beliefs about when they read the study, if they think it will replicate, economics does better than others. But still, it's still well, short of 100%, replicating. And when people have tried to replicate, like experiments in economics, they've replicated a higher share. So like, instead of 60, or 70%, not replicating, it's more like 60 or 70%. replicate. And yeah, so but that was also a very small study, like 18 studies instead of the 100. So I don't want to step too far out, you know, but I do think, I think it's not as bad and in economics, and it's, it's pretty, it's reasonably good throughout most of the sciences. We do know, that, like, there's a lot of problems within biomedicine. Gotcha. And we know that because people try to build on biomedical research, and they're like, this doesn't work. And there's sort of this rule of thumb that you should apply, like a 50%, this, you know, only half the things that seem to work in academia will work out out in the lab. But at the end of the day, we do push forward based on that underlying research. So that's my, my sense of it. And yeah, like one of the questions I sort of got interested in is like, why is there this variation across different sciences? Right? They're all scientists, or they're all operating in sort of similar incentive schemes to try and publish and get, you know, grants and stuff like that.

Will Jarvis 8:18

Gotcha. Do you think that's perhaps because, you know, each domain, and then each sub domain, do I have this feeling they each have their own kind of unique culture? And there's not a ton of cross pollination? Is that the case? Or what do you think?

Matt Clancy 8:32

I don't know, it's like, it would be hard for me to assess if like, the culture is very different. The things that I've sort of zeroed in on, is, and I should say, like, this is like, comes from surveying and synthesizing what other people think there's not like original Matt Clancy ideas or anything, but stuff that I found compelling was like, one, this back and forth with technology, where like science is set up so that you, you're supposed to discover something new and novel. And right till very recently, there wasn't a lot of incentive to replicate stuff. And replicating is like really expensive to rerun experiments and all that. And the hard science is sort of have this built in replication system, like, you know, if you come up with a Biomedical Discovery, and it's useful, a pharma company will perform replications for you in the form of clinical trials, you know, like, I

Will Jarvis 9:19

tried to translate that,

Matt Clancy 9:21

right. And so I think that the fact that we don't have these close ties to like the implementation of policy is is like a handicap the social sciences have. So that's one explanation. And then another one that that I've seen that I like is is about the theoretical framework that different sciences have. So in some domains that are very mature, they've got like a unified theoretical framework that guides inquiry. And so you focus on problems that are really, you kind of, you have a really theoretically justified reason to look at that and you sort of expect you know it to, you have an expectation about the kinds of things that you'll find that a reason The ball. And if you don't find that it's actually very interesting and surprising, and maybe you have to revise the theory. But a lot of the social sciences have been described as, like having this problem of, I can't remember what's like, in compatibility or something. there's just tons of incompatible theories that are like all micro little theories about this, or that rather than these, like, overarching, big picture frameworks that everything sits inside of. And when you have like 100 little theories that each explain something different, it's really hard to like build on other studies, because like, the study that's over here, is about, you know, one thing and like, you know, how children are affected by their parents smoking habits or something, and then I have this other paper that's about, you know, something totally different. And I can't really those two studies can't talk to each other. They're like, based on different theories and right. But that might be a reason why economics is like, has some good things because economics has some ties to the real world application through like, its sort of role in government. Right. And also, economics has like, for better or worse, a pretty big, unified overarching theory, like theoretical approach, which is like optimization, profit maximization, this or that. So anyway, that's that's kind of what I've, that's what I've looked into that sort of my takeaways on that. So got to having like a bedrock a common framework to look at everything helps unify things. Right. Right. And so this is an idea that has been articulated by like, Joseph Henrik. And I would say from our success, yes, exactly the same guy he's written, he's written a paper about the importance of degenerate unified frameworks with I think it was Michael with a Krishna, I think, is his name. But anyway, they, you know, they've got something in science about this problem that they kind of are advocating for the secret of our success type flavor, as that should be the unifying framework that we can build on.

That's awesome.

Will Jarvis 12:03

But very interesting. have to check that out. So I'm curious, you know, where do you fall on the kind of secular stagnation? You know, first of all, you know, secular stagnation? Do you think it's, it's a real thing that's happening? And then second of all, if it's happening, do you think it's because we've picked up just all the low hanging fruit?

Matt Clancy 12:24

Yeah, so secular stagnation, I think is like a term that is recently famous from larry summers and stuff, but like, the people that kind of circles? Do you mean, like the sort of technological stagnation? Yeah, like, Tyler Cohen?

Will Jarvis 12:37

Like what happened in 1971? kind of thing? Right?

Matt Clancy 12:40

Right. Yeah. So I've always been, like, more, I've been on the side of like, the stagnation skeptics a bit, I actually don't think the data we have is very good for confirming it. And then we have all these other biases that are gonna make us

Will Jarvis 12:54

like a typical present bias is

Matt Clancy 12:56

crazy, right? We just always, like, we have this could this data bias, things are always better in the past? Yes. And like, so like when people. And also we have the form expectations about the trajectories of technologies based on where they're going. And then if they change directions, it can be hard to appreciate that. And instead, we sort of just think that they're not going, our expectations aren't being met. And so, you know, we expect we kind of up to the 50s had this expectation that we're heading towards, like Star Wars and Star Trek, right. And then we had things like the oil shock and stuff and we move in, it seems like science moved in this more like, let's figure out how to use energy efficiently, or information technology. And so there's all these ideas about what we should have, we don't have them, we don't have the spaceships, we have this other stuff, we don't quite know what to think of it. So it doesn't sort of count as much. And then like, if you look at the data of like, the big thing people look at is total factor productivity. And I think that that has certainly slowed down since like, the 70s. But then there's like this other idea that it's slowing down a lot more since the year 2000. It's true like that it has slowed down. But I actually don't think it has much to do with technology. There's like an economist who's written a really nice book about just sort of all these other factors that pulled that data series down. And there's not much room for technology left after all that. So I'm a sort of a technology stagnation skeptic. Yeah. I do also think that the other thing you said about whether we pull the low hanging fruits, the actually do kind of think that that is true. I think that it gets harder to innovate. But the sort of reason that I can kind of believe stagnation isn't that isn't really happening, or might not be happening and that innovation gets harder is because we just plow way more resources into innovating as our economies grow richer than we did like decades ago. So like, we kind of match the challenge by putting more resources into it. Like we constantly spend, like between two and 3% of GDP on r&d, but the country is grown bigger like that. has resulted in like larger, larger absolute resources over time.

Will Jarvis 15:03

Right. Right. So it's something like it's, it's harder, but we've got more people working on it. So maybe Yeah, maybe kind of washes out.

Matt Clancy 15:10

Yeah. I mean, I think that that's, that's my view, roughly, I just think that like, it's hard to take a firm stand on the stagnation issue. I think from the 70s, you have a better argument that things have stagnated since like the 2000s. I guess when I like the technology has has stagnated maybe since the 70s. But like, yeah, since the 2000s, less clear that it's due to technology instead of other stuff.

Will Jarvis 15:35

Gotcha. Okay. But if you don't mind me asking. Like, what, what, what other things could do you think contributed? I guess?

Matt Clancy 15:45

Yeah, so I'm recapitulating. here from memory, this great book by Dietrich Vollrath, called fully grown. And so he breaks down the causes of the slowdown in GDP real GDP growth since the year 2000. A big chunk of the slowdown in real GDP has to do with like, labor inputs. So like the number of people who go to college sort of has plateaued out the number of new people entering the workforce has plateaued out as we like moved the one a whole gender into the workplace and right, but then that still leaves a bit left. So that's like, that's the big change. But that still leaves all the TFP stuff. But when you look into TFP, there's a couple things that have changed. One is like different sectors have typically had have typically grown at different rates, like their productivity has grown at different rates. So services tend to grow at a slower rate, productivity and services tends to grow at a slower rate than in manufacturing. It's like hard to cut hair more efficiently. Yeah. Or like I always think of daycare, like, what would it mean to like, get more productive in daycare? Because I have kids in daycare, like have one person watch more kids, right? Yeah, just like makes you uncomfortable? Until we get really good robots. But uh, anyway, the way that like, TFP series is constructed, it like looks at how much people spend on different sectors. It gives those sectors more weight. And so Vollrath argues that basically, as we got richer, we basically were like, these TVs are great, I don't need to spend as much money on them. Because I'm very happy with the quality of my TV now. Yeah. And I'm going to spend more money on health, education, and daycare, and gotcha, those are sectors that are growing slower. And so there's, it could be the case that everything is growing at the exact same rate as before, but we're like shifting our spending towards the slower growing sectors, which makes that number, slow down. So that's one example. Another is, there's been a decrease in geographic mobility, which like people don't move from state to state as much as they used to. Yeah. And that process has traditionally helped the most productive workers get matched to the job that is like most productive for them. So that's like a little drag, but it doesn't have necessarily much to do with technology. It's sort of like, I've seen one paper that argues the reason people aren't moving so much is because we had this frontier, that people like, you know, migrated out west. And that effect lingered for another generation. Because when people grow up, like on the west coast, but they don't have like grandparents and deep roots to that area, they're just more much more willing to move than people who grew up out in the East where like, they've their family has been a sky on for like 100 years or whatever like that. Right? So they these guys that argued once you take that into account, like there's not really any puzzle why people aren't moving as much anymore. So that's, that's really weird and kind of a cool, but it doesn't have much to do with technology. Right. And then a third one has been like there's a slowdown of the formation of new businesses. So that could be because technology slowing down and there's not as many new exciting startup ideas, but it could also be that there's sort of more market power dominance, and it has like, it's like these institutional the way our market works factors. So that's, that's my quick overview of Vollrath. major factors. I think that it from memory that that explained the slowdown, and it's sort of sort of, he doesn't address technology, but basically, he's just sort of like, Well, we've already kind of explained the slowdown without needing to get to technology. So we'll just add it.

Will Jarvis 19:25

We're done. Make sense? make sense. super interesting. So, you know, how does one think about speeding up technological progress? You know, it does seem at the very least, that we've got a lot more people working on it. You know, maybe we're getting the same output but you know, we are spending a lot more money. Are there are there any low hanging fruit there are the low hanging fruit and speeding up technological?

Matt Clancy 19:50

Yeah, so I wrote a the website you know, has like all these different articles that each cover different aspects of like, what I think we know about innovation. So I wrote this piece about like trying to sort of sit on top those and organize them to say, how do we accelerate technological progress based on all this stuff. And so I think one of the takeaways is that there's just like, it's like, think of this whole pipeline. And there's lots of places along this pipeline where we know a little bit and we can sort of push it along. So like, my pipeline is like, you need people. You need people who are motivated and looking for solutions to problems. So they're not just sort of complacent and thinking that taking the world as it's given, but they're actively thinking of it as a possibility to go out there and make changes to that world and try to solve problems. Like I think have the longevity people who are like, maybe we should not take it as a given that you just have to figure out how to spend your 80 years,

Will Jarvis 20:45

maybe we can get by just like shifting the fact that in that case, it's like just it's an it's shifting the psychosocial thing where we all just accept that you're at yours, you know, it's like this the natural thing, like once Yeah, you're clearly Your time's up with your ad. So I just move on, right?

Matt Clancy 21:02

So anyway, there's, you gotta have people who are kind of interested in finding problems, you've got a, I think they're more efficient at pushing technological progress if these people are equipped with knowledge about how the world works, and what's worked in other cases. And then they also need resources to go about inventing, and they need incentives to know that the idea of, you know, working on longevity or something as a possibility, they don't take it as a given. But there needs to be an incentive to push them along to do that. And then you've got to figure out once you do that, how to organize your group of people. So that's sort of my pipeline. And like, what do we what each one of those pieces, you can probably do a few things that will like, you know, tick up the, its its impact a little bit, and then you stack them all up, they compound. And then over time, if you can, like boost the rate of, you know, economic growth by 1% per year, or something over 100 years, that adds up quite a lot. So, you know, specific concretely, like, if you start like way at the beginning, like people, more people might be useful, but I actually think we probably have, like, a lot of people on the planet, and like our binding constraint is maybe more that second one where like, how many of those people who are alive today are like in a position to be able to innovate and solve problems and get the resources and knowledge they need. So I looked at some, you know, I've written about studies about entrepreneurship, and what makes people decide to become entrepreneurs, and kind of arguing that being exposed to people like yourself, like, if you're a woman, a woman, or if you're, you know, a minority, a minority, people like that, who are already doing the same thing, or being entrepreneurs, then that kind of sends to you a message like, Oh, this is, this is something someone like me could do. So got it. You know, concretely, you know, you could have mentorship programs or something or things to kind of connect people with examples or exemplars of, you know, innovation or entrepreneurship, and then equipping these people with knowledge, well, you've got to like discover things. And I think, you know, you can fund the scientific ecosystem, it can be done that can also be improved. And I think that even as dysfunctional as it is, right now, it still is, like a huge windfall. But like, we could double the amount we spend on r&d, I think without it being a waste of money. Like I was just reading about, like, the scientists account of creating the AstraZeneca vaccine in the UK, and they talk about how, you know, all these money struggles and so on, and, you know, they they have like a one in three shot of getting any grant. And if we doubled the amount of spending and all we got was the AstraZeneca vaccine, like, or a vaccine, like it that worked much quicker or something because that's, that would have been one thing that would have been, that probably would have already, like paid for itself, right about how much money is lost by the pandemic. Third, like how do you disseminate all this knowledge? There's studies about like, well, things that are like really obvious work like libraries or and like, you know, I like hope modestly think that like, what I'm trying to do is like a bottle of that too, like disseminating research in a way that is accessible to other people. I actually like resources. So you know, the government can, instead of funding scientists can also give money to innovative companies. I've written a bit about like the small business innovation and research grant programs SBR programs. Yeah, they seem to be pretty effective like at like, they seem to give money to companies that use the money well, and then like go on to do innovative things compared to companies that are very close to getting the funding, but just missed the cut off by one, there's like a pretty big difference in outcomes.

And then where are we here in the funding? Yeah, so incentives. This is one where, like, economists focus a ton on this, like, patents copyright. And I actually think that the incentives are not really a big problem at the moment, like, if we strengthened further intellectual property rights, I'm skeptical that we would see almost any benefit. And we should probably, I would tend to think like, we should move in the other direction of loosening them up so that it's easier for other people to build on ideas, and they're not locked up behind IP for so long. There's always exceptions, there are always certain industries where the IP is really important. And without it, there wouldn't be as much innovation. And then I think that the fact that there is a group, there are people who really benefit from that is one reason why there's not a general move to reducing them because there's like a very motivated group to lobby for them. And then as for organization, you know, I think that that's like, that's not an area that I've dug as much into but except to say that teams are sort of like, teams are really important for innovating, much more so like then, nowadays than they were like 100 years ago. And so figuring out how to coordinate a group of specialists is sort of important for pushing lots of frontier research. So that's my, I don't know, 30,000 foot view?

Will Jarvis 26:37

That's great. That's great. A lot of actual stuff. This kind of this is kind of a general question. So it might be hard to answer. But I am curious. You've read a ton of literature on innovation is their thing. Are there things that are common knowledge in the field? That, you know, kind of would surprise, you know, just lay people to hear about innovation? Hmm,

Matt Clancy 27:02

that's a good question. And, yeah, so think about that for a second. I remember I thought about this a little bit. Things in the field that would surprise a lay person,

Will Jarvis 27:17

or they would find not obvious, I guess.

Matt Clancy 27:18

Right. Right. So I think one of them is maybe what I just mentioned that like, I don't know that stronger incentives, like people that actually looked to see if you strengthen patent rights, like in the I don't know, I think it was 80s or 90s, they, some of these international agreements lead to stronger. They, there's a harmonization of the patent regimes across countries. And so you can see what happens when countries that previously had weak patents switched to having strong patents. And there's just not much effect like on the incentive to innovate there. Or there's not much of a net effect, like maybe people do innovate more, but then it locks up the ideas more in that counterbalances it. Gotcha. So that might be surprising to some people, but other people not I think, in general, there's like a lot of sort of folk wisdom. And a lot of it's right, but what's helpful is like, the research can sort of say, this one's right. This one should be de emphasized, because it's like applicable in some settings, but not in others. Like, it helps you kind of sort through, in what situations one thing matters versus another. So to take another example, this discussion about mentors and how important they are for fast fostering like and creating sort of innovative people, maybe Yeah, people are interested in innovation. So I argued that once that sort of seed is planted, like, once somebody has this idea, there's not actually that much more benefit to having that be around, like even more and more in event inventor. Interesting. So like, there have been studies where say, a person goes to work for a startup. And so everybody who works for a startup is exposed to one entrepreneurial person, the founder, and, but the probability that those people then go on to start their own businesses is higher if the founder is more like them. So if they're, if they're both mothers, or they're both, you know, from the same birth region, and they're both the same gender, this or that, or their same age and the same gender, something like that. But this effect is there for people who are sort of not otherwise exposed to invention. But like if your parent was an inventor, or like an entrepreneur to this has no effect on you, because you're like, I already knew that people did that. And like so as a processor. Yeah, it's a possible path I could have taken and they actually there's like a study in the Harvard Business School. When people start at Harvard Business School, they get broken out into these different sections. Yeah. And so you get assigned to you kind of get randomly assigned to a bunch of people and so you would naturally predict the people who are around Students who were previously entrepreneurs are more likely to then start their own business after leaving Harvard Business School, they actually found the opposite, like, people who are around more entrepreneurial students, you know, students who had previously owned businesses were less likely to become entrepreneurs. And when they sort of dug into why is this the case, they're like, well, maybe it's because these guys were bad entrepreneurs, since they obviously chose to practice as a school. But this doesn't seem to be the case. Like, people who go to Harvard Business Schools seem to be disliked. They're much better than average learners.

And it looks like what happened is like, my take on this is people going to Harvard Business School are plenty exposed to the idea that they could possibly think of starting a business. Like they get that they're, they're kind of, yeah, they get that in their classes. They think of that. And instead, being around these entrepreneurs, it seems to have this effect of like weeding out bad ideas. So like, people who would have gone on to start a bad business, talk to a friend who's like, no, this is this is a bad idea. And so they get dissuaded from it. And because the effect on sort of successful, like the number of successful businesses that get started isn't really much affected. But being around more entrepreneurial people seems to cut off in this case study more of these sort of failing businesses. And so, yeah, I don't know, like, that's just, I don't know if that's common knowledge in the field or whatever. Alright, here's one that might be more that might be surprising to people, because a lot of talk about remote work, and how can you be bad for innovation, because it's really important to have Hallway Conversations and to run into people at the watercooler and so on. And there's some truth to that. But like, academia, as a, as a field is like, also trying to be innovative, they're trying to publish new research. It's very competitive. There's like not enough grants for everybody not have spaces in journals. But they don't seem to get value from that kind of interaction in that field. And so if the share of papers that are written by academics that belong to different universities, has been going up and up over time, and like, I think it's like 75% of papers now have at least one author who's not in your universities is somewhere else. And people have done other studies where they've looked at, like, what happens to your productivity, when you say, get hired and go to Harvard. So you're an economist, you've got, you've been working hard, you've been noticed, and you get hired to a top 25, department and so on. And now in theory, you're gonna have access to all this, like hallway conversation with other peers who are really smart at research and everything. But like, it doesn't seem to make a difference it did in the 70s. And the 80s, the effect was smaller, but by the 90s. Like, there was no impact. And it seems like it's because these guys all sort of maybe know each other through conferences. And if you were a good work partner, well, we just work from different universities, like, there's, like, give me a call.

Will Jarvis 33:03

Right, right, Matt. Right.

Matt Clancy 33:04

Exactly. So anyway, I think that that's sort of like a slightly optimistic read on, on the potential impact of remote work on innovation. academia does have a lot of like social structures that have arisen to sort of help people get to know each other, even though they're not close, like the conference circuit, the seminar circuit, and then like this norm, that you're gonna spend five years getting trained at one place, then you're gonna go somewhere else, maybe do a postdoc and then go somewhere else, you're going to build a network as you go in very different geographic locations. So anyway, that's, I don't know, I think that that's a reasonably optimistic but might be surprising to other people.

Will Jarvis 33:49

That's great. That's great. Any other big takeaways from remote work? Yeah, you've looked into a little bit, even before the pandemic and now it's become much more widespread. It does feel to me that there it's a there's there's been a fairly permanent shift to remote work. I think it like some people will go back but I think that there is a large chunk of people that have gone remote and will stay remote. Is that kind of your feeling? Wait, what do you think about that?

Matt Clancy 34:16

Yeah, I 100% agree. I think that this is another example where I think social science research was largely validated. Prior to COVID-19 there had been a handful of well done academic studies that looked into the productivity of people working remotely and they kept finding Hey, it seems to be really good. And so you know, like people are actually more productive if they're working in a call center and they're working from home. Same thing for patent examiner's hadn't really been examined, though for like, you know, I don't know really collaborative kind of Yeah, projects. But anyway, like, the bad experience and also they found people tend to do like remote work, or at least part time Like maybe not 100% remote, but they liked the opportunity to work from home and would be willing to even take pay cuts to maintain that. And all that seems to be like borne out by this crazy natural experiment 19. So I think it's certainly gonna stick around. I think the, you know, the internet has basically just like, slowly crept up, and maybe working productive, working from home productive, but it took time for the infrastructure to be laid down. And then it took further time for people to get comfortable using it, and new tools to be developed it built on that infrastructure. And even before remote work, or even before COVID-19. It was like ticking up year after year from very low basis. And there was like, 3% of people working remotely than 4%. And 5%. I think it'll go to like, based on surveys, 20, maybe in the long run, like 30% of people working remotely, still not the majority of people working from home, but a lot more than 5%. Right. And yeah, the other thing that's kind of interesting about remote work is just that, I think it's kind of shows the importance of these, like learning. So firms, it's hard to have an experiment where you, as a firm, try remote workout for a year and sort of see how well it works, and then decide if you're going to do it. But when everybody was sort of forced to do that, they did learn a lot about how things like, Oh, this works better than we thought. And that sort of suggests there might be other practices, we're doing that if we like somebody is out there right now insisting This is better. I have studies they show right? That doing it this way is better, and everybody's sort of writing them off. But if we like what I try it for you. Yeah. So I think that's it. And then others, like the importance of sort of these equilibriums, where like, if you don't offer remote work, now you're kind of the, for some sectors, you're the odd person out. So like you have to sort of stick with everybody else, and make it work. In terms of its like impact on innovation. I think that academia and other shows that like it's certainly possible to work on projects remotely, very successfully. I think, though, the kind of tricky points are that academics really did rely on those mechanisms for meeting people like right. And 100%, like in a hybrid work environment that might not actually if like, most people go hybrid, I wonder if that will just not be an issue at all, like people will be in the office enough, they'll be in the downtown enough to meet people. And it's not important that they see each other five days a week, it's just important that they sort of have a rough idea what everybody else is working on and who everybody is. And sort of, maybe that will be, maybe it won't be a problem. If they're fully remote, then you start to have to introduce new mechanisms to get people meeting each other, whether that's like having annual get togethers or quarterly, you know, work retreats, making the conference circuit a bigger part of the career, or potentially building useful sort of online social networking spaces. So like, I've had a lot of luck with Twitter. It suits me, but I don't think it suits everyone I just saw Derek Thompson is a reporter for the Atlantic or writer for The Atlantic. And he called it like, social media is like digital or attention to alcohol, where like, a lot of people can use alcohol respect responsibly, and like it reaches their life. But some people it's very difficult to use responsibly. And anyway. So I think facilitating those meetings is sort of the big challenge. And we don't research can't tell us that much about what works and what doesn't, because we've never been in this situation before. Right. Yeah.

Will Jarvis 38:38

I think that's that's well put. I'm curious. Did you know, people had the sense that remote work is somehow like, like we're having this meeting virtually, is conversation virtually. It's a, that it's inferior to being in person. Do you think that's just a feeling? And I even if it is just a feeling people have it could still be completely valid, right? Like, they just feel that it's like, it works, like meetings are somehow less personal, something like that, then it could still have the same effect. Do you think there's something real going on there?

Matt Clancy 39:11

So I think that in some settings, there is something real going on there. Like I think that as good as this conversation is like, it would probably be better opposite. We would have more fun, but I don't like Tyler Cohen does his conversation with Tyler podcast. And yeah, he had to switch to doing them all remotely. And he talked about how like, people in the audience, people are listening can't tell the difference. But maybe from his perspective, it's not as fun. Okay, so right. So that's something. And then there are some studies about certain kinds of meeting tasks that haven't been done, don't work as well remotely right now. And that's, I think that's always important to sort of know, this is like we're taking the sort of conventions that arose in one setting, right? And we're now trying to sort of figure out how to make them work in a different setting, and it's not getting guarantee that everything will just carry over in the same way, we might have to do things differently. But like, people complain about digital wipe, like the whiteboard meeting, yeah, it's a lot harder to have digitally, or meetings to set the big agenda for a major project. Yeah, are harder to do remotely. But once that set, you can assign everyone their tasks, and then remote collaboration works very well. So one solution to these things is like, just identify what you can't do remotely. And that's what you do at the work retreat. So that's one possibility. The other thing is, when I first started reading about this, I always tried to emphasize, it's not really necessary for remote work to be as good as in person for it to take off, it just has to be good enough for its own compensating advantages to make the net trade worth doing. So it would be better maybe if we around a table, but the reality is that probably wouldn't have happened. I mean, you're not you're not an Iowa. Are you in North Carolina? Yeah, it would be a quite the trip. Yeah. So maybe we would get really lucky. But otherwise, like, it's just not happening. And so there's lots of interactions like that. And there's at a hiring level, like, there are people you can't hire because they don't live locally. Or, you know, I moved back to Iowa to be closer to my family. And I'm here, I'm fixed. If anybody else wants to work with me, they've got to, like, remotely work with me. Yeah. And so that is sort of one example of like, you know, if you can get night if it's 90%, as good to be working remotely as it is in person, but you can get a person who's 10% better than you can get locally, the to wash out.

Will Jarvis 41:46

Definitely, definitely. I think this is long term bad for commercial real estate. But you know, it's quite, it's quite interesting.

Matt Clancy 41:53

Another weird wrinkle is like, so yeah, when there's less demand for downtown space, people, people move out, but like, in the long run, the equilibrium is alright, so downtown real estate isn't as expensive. There are currently people who are living in the suburbs. They'd rather be downtown if they're cheap enough, it's more fun. And so there's this reallocation, it's actually like suburban real estate that is probably worse off than like downtown. And, you know, I predict in the next 510 years, people be like, oh, remote work was overhyped, every downtown is just as busy as ever. And it's like, because it's the suburbs that are seeing like, it's like, the places that are far away from downtown, that are gonna see this, like decline and, and thing. And there's this other potential benefit of remote work where like, certain jobs, maybe they really do need to be done in person. And now those people are able to be downtown. And it's more attractive, and it works better for them than when they were out in the suburbs. And there are other jobs where it's not that important to be close. And those guys are sort of out of the way now.

Will Jarvis 42:53

That's great. That's great. Yeah. Super cool to go. So are you down for a route of overrated under it? Sure. Cool. So Ames, Iowa, overrated, underrated? Ames, Iowa

Matt Clancy 43:04

is where my university is.

Will Jarvis 43:08

pointing to this year.

Matt Clancy 43:09

Yeah. They just lost though to stay rival. Yeah. So I think I was compared to most people's who don't know what Ames is. It's underrated. I don't even know what it is. Yeah. It has its like innovative little college town. It has a little high density of like patents per capita. So you can sort of see this in these little maps of like, all this cool patents per capita. And there's exciting cool companies there, that that are born out of the sort of university ecosystem. So I get I'm going to do a shout out to Nebula, which is like, placed vertically farms, lettuce, and then they like deliver it to your door so I could go, but I don't live in Ames myself. I live in the bigger city of Des Moines, which is like 40 miles south. So read into that what you will, yes. Nice, nice.

Will Jarvis 44:01

mercatus, overrated, underrated.

Matt Clancy 44:04

I think they're also probably underrated by most people. So, you know, the mercatus Center has this very interesting. I'm mostly thinking of the emergent ventures and fast grants programs, which I think are like, I don't know, a really cool proof of concept of like a different way to fund things that is really promising, like, so the emergent ventures is what funded my website project and like, their application process is just like a 1500 word essay describing you and your idea. And that's it and they like make fast decisions, and there's very little bureaucracy and they get pretty good results. And it just sort of suggests like, is that should that just be the norm like are we what are we really gaining from all the other layers and I would, I hope to later dig into like, see what we know about if those extra layers of vetting and stuff add much value And then for COVID-19 de rent they did, they built on that infrastructure to do something called fast grants, which I guess probably a lot of listeners know about, but it was like, super responsive and poured out, you know, handed out tons of money related to COVID-19 research. And compared to the government, which was like standing still, and I didn't do anything a month. And like, there was a report that it was like they 5% of NIH funding ended up going to COVID research in 2020. And it took months on average, to get some money out the door. And, you know, to what, to what end? I don't know, like, right, like, yeah, like, did they really? Was it really important to not give that money to the wrong person? Yeah, that guy waste the money? I don't know, from a political economy perspective, it probably was important from for the agency's survival. Right to do it like that. Yeah. You know, it's, it was disastrous for the rest of us.

Will Jarvis 45:53

Definitely. Do you think? Is that something that can scale? Or is it something where you have to have somebody like, Tyler Cowen, you know, just, you know, he's like, the monarch. He's like, you know, Matt, got a great idea. This is you should use some of these to pursue, you know, innovation and like, look into this. And like, yes, we're gonna find your idea. Is that something that scales where, you know, or is it something that doesn't, because you really need, you know, one kind of absolute monarch who's really good at like, making decisions and picking people? Yeah,

Matt Clancy 46:25

I think that's, I think that's exactly the question. Does like, so as I mentioned earlier, I read this book about, like, vaccine development, and it's in the UK, the, the UK is FDA, the, I can't remember the name of it, they were a lot more flexible and responsive and moved quickly and getting the trials for that vaccine set up and running. And this person, the, the doctors, I think, is Katherine green. I don't remember who the other one is. But they, they worked with the US Agency to so they have kind of a nice comparison. And they're trying to sort of be diplomatic. But you do get the sense that the basically the UK one is smaller in the sense that it's a smaller country, they have more close to have like personal relationships, personal some degree, with the people funding it. And so I do wonder, like, when you have a big country trying to give out billions and billions of dollars, it might be hard. But I still would like to see a lot of work to really scrutinize, like, do these extra layers of vetting? Are they adding anything to it? Because they the fast grants, did a survey of people who responded and sort of they found, like really alarming findings, where people responded, like, if I was able to get all my funding like this, my research agenda would be totally different. Or Yeah. Yeah.

Will Jarvis 47:43

I've wondered if it's some effect where like, you know, everyone starts out with, you know, it's like a small group is either a small committee, or it's like, just one person giving out the money. And then, you know, one person's a fraudster, and Miss spends the money on a yacht and goes to Aruba. And then that's on the front page of the New York Times. And then you know, you could never do that. Do it like that again. Exactly. Yeah.

Matt Clancy 48:05

So, you know, I think agencies work best. Everything works best when organizations can rely on trust and judgment. But then eventually, if you're long if you're around long enough, somebody, somebody that judgment, and then the agents, it's pretty tempting to respond by me creating a rule, but then there's just this long run effect of the accretion of these rules, things get worse and worse.

Will Jarvis 48:28

Well, so on that note, you know, overrated or underrated government funded science.

Matt Clancy 48:34

So I'm going to say this is

Will Jarvis 48:37

correct, properly rated.

Matt Clancy 48:38

This is roughly properly rated. I think people recognize it. And I say that because it has a generates enormous value like it. The modern world is built on science that is ultimately funded by these these grants, I think. But I think there's like, we're very far from optimum. We're like, very, there's lots of scope to improve, at least that's my rough sense. And so that, you know, balancing those two things out, if we could spend a lot more money on government r&d, but we couldn't reform it. I would still certainly say, Yeah, let's do it. Right. Yeah. And if it was, like, Can we reform it? I don't, I would still probably rather have the money, but I prefer to do both.

Will Jarvis 49:22

Nice. I like that it well. And I think people forget also, there's some cases where the government, government funded science has done really incredible things on short timescales, like the Manhattan Manhattan Project, incredible amounts of So yeah, I definitely agree. I think it's a good point. Corporate research labs, overrated or underrated?

Matt Clancy 49:44

Yes, this is an interesting one. I think that this like for a lay person. The role of corporate research laboratories in the past is, is underrated like people don't, a lot. It's not conventional wisdom. How valuable these So there's these economists, Ashish Aurora, Sharon bellinzona. And, and others who've written a lot about this. And they, they sort of point out like, Look, these guys, scientists, like Bell Labs. And so they these guys win Nobel prizes for their Yeah, you know, like they were really pushing the frontier. And there was this very close connection to technology, which we sort of talked about earlier. And the thing, so there was like, implicit replication. But because they were in these corporate research labs, they also had the financial resources to like, try big things. And also like an agency that was coordinating disparate activities, like, instead of keeping everything siloed, it had to figure out how to get everything to talk to each other and work together. And so they did amazing things. But I think that's the past and the same economists work makes me think that actually, like people thinking that if we can just go back to that, that will solve a lot of problems. Like that's an overrated idea. Like they were appropriate for the time they were in. But there are like, there are reasons why they're not around anymore. And one of them is just that, like, it's easier for as the skill level of different organizations has gone up, it's easier for them to like, learn from each other and steal each other's ideas, basically, gotcha. So these, these economists have shown that like, these guys are citing each other's like, if you publish a scientific paper, and I'm a scientist at Bell Labs, you know, my papers now a lot more likely to be cited by a rival than in the past. So they're reading what I'm putting out, and they're sort of building on my ideas. And I thought another factor is that these major companies are more specialized than they were in the past. And that also makes it harder to fund basic science, because basic sciences, by its nature, really unpredictable. And you don't know what the outcome is going to be. And if you have like the sprawling, giant, we have a division for every kind of product. Yeah, it's like very likely that it's at least sort of likely that at least one of those spin offs will be useful to one of your departments. But if you're really specialized, a lot of that is just it flows. Likely. Yeah. And so, you know, firms closed them down, because they just became less profitable over time. And if we can't, like, we can't just wish them to be more profitable. And I don't know, we could, it's so it's hard to, it's hard to justify, or it's hard to see how they can come back to the same in the same way they were in the past, there are some special cases, like, you know, some AI stuff, especially that sort of has the flavor of those older labs. But even there, I sort of feel like they, you can kind of see the examples where like, you know, alpha, alpha fold, like the protein folding thing that's like, awesome. But is it going to be like that company's expertise to like, use it, and they have to, they'll find a way to license it and stuff. But you can imagine that like, if they were also in the business of like discovering proteins, then that would be like, that would actually be really useful. That'd be like, this is great. Thanks, guys. But maybe a little bit less now. Like, yeah, so anyway, that's, that's why I think they're like, you know, underrated in the past, but maybe overrated going forward. Gotcha. I,

Will Jarvis 53:18

that reminds me of Have you read scientific free freedom by Don Braden? No, no, I haven't read it. So it's recently republished by stripe press. So we had Don on the show, and Dino Don Benitez of the Don braven.

Matt Clancy 53:33

I've heard him discussed on your podcast.

Will Jarvis 53:36

Okay. Nice. Well, he had this idea where he ran, he ran the labs at BP, British Petroleum in the 90s. And he was able to get, you know, like a Nobel Prize out of it for one of his scientists and a bunch of really big advancements. And they spent like 6 million bucks. And his whole model is just give people it's kind of like a version of metrics just give people pretty much no strings attached money, just enough to pursue their project on three year cycles. Do you think something like that could work nowadays?

Matt Clancy 54:10

Yeah, I would love to try. I think that like, so I listened to the podcast where I think it was like Jose talked about, yeah, basically, I agree with him that like, for some people and some types of projects, that sounds great. The challenge with all those is like you have to give the money to the right person. Right. And like, it can be hard to, you know, I don't know, you need like a relationship. It's hard to scale that and like an impersonal bureaucracy sense, you know, but there should be somebody doing that. You know, we're

Unknown Speaker 54:40

trying. Yeah. Very cool. Awesome. Well, Matt, thank you so much for coming on and taking the time. Where can people find your work? Where should we send them? Yeah, so

Matt Clancy 54:50

the main place is new things under the sun.com or you can subscribe to the newsletter. There's links to that all there. Or, you know, I'm on twitter at Matt s. Clancy, my middle name Spencer. And yeah, I have, that's probably a good place to find wisdom, most of what I'm working on.

Will Jarvis 55:09

Awesome. Thanks so much, man. No, thank you. Thanks for listening. We'll be back next week with a new episode of narratives.