November 6, 2023

Harvard professor Josh Lerner explains the risks and requirements of public intervention in establishing a thriving venture capital and entrepreneurial ecosystem. 

Professor Lerner tells Ross Butler that seeding a venture capital industry is a difficult and slow process – it’s not just the case of emulating Silicon Valley. With reference to his classic work, ‘Boulevard of Broken Dreams‘, Ross Butler asks for Josh’s key recommendations, and in particular whether increasing the supply of venture capital or the demand for it, is the more sensible route for policymakers. 

With reference to the US, Japan, Australia, the EU and Great Britain, this wide-ranging conversation looks at where policymakers are going right – and wrong – when trying to promote entrepreneurial risk taking and institutional venture capital. 

We close with a look at the importance of ethics when working at the cutting edge of scientific innovation. 

[00:00:00] Ross Butler: You’re listening to Fund Shack. I’m Ross Butler and today I’m speaking with Josh Lerner professor of investment banking at Harvard. Professor Lerner teaches venture capital and private equity one of Harvard’s biggest elective courses. His research focuses on private capital and he has many published papers and books on the subject including The Money of Innovation, Patent Capital, the Commingled Code and Boulevard of Broken Dreams. He also founded and run as the not for profit Private Capital Research Institute. In this episode, among other things we will look at how to nurture a thriving entrepreneurial and venture capital ecosystem.

Professor. Welcome to Fund Shack. Just after the great financial crisis you published a book called Boulevard of Broken Dreams which I read at the time and it’s one of the more poetic titles, I’d say in the pantheon of venture capital literature. So well done on that. And in it you made a very nuanced argument, I thought for the necessity of state intervention of public sector support to at least kind of seed and nurture venture capital ecosystems in their formative years and decades. But you also equally, I think, put as much emphasis on the pitfalls and of not getting it wrong and hence the title of the book, I guess. So I’d like to look at both of those angles. I mean, I guess I’d start by saying do you still believe that state support is necessary? And if so, kind of why do you think that is?

[00:01:25] Josh Lerner: First of all, thanks so much for the chance to be here and it’s great to get a chance to talk about these really important issues. I think that the answer is yes. That the nature of venture ecosystems which in some sense are even more compelling today than was the case 15 years ago. Given the kind of growth we’ve seen in both new technologies like artificial intelligence but as well as just simply the creation of wealth associated with these new ventures with jobs and the like, that this is a tough process. We’d like to say it’s just a matter of sprinkling a little pixie dust and it takes care of itself. But it seems it’s a really slow process of trying to get a lot of things coming together and in a way there’s an instinct to look at Silicon Valley and say wow, that’s great. I can just clone this and carry it over and just get the right looking buildings, a fancy university, a few fancy professors and everything will take care of itself from there. And I think everything we’ve seen about creating these kinds of clusters suggests that it’s a much longer and much harder process than that where we have to get a bunch of things coming together.

Were we trying to put a label on it? We might say, increasing returns.

[00:02:57] Ross Butler: Right.

[00:02:57] Josh Lerner: That it’s really hard to be the first entrepreneur in a city in a category by the time there’s 100 people buzzing around doing stuff in that area, it’s much easier. But that process from going to one to 100 of really getting the plane off the runway is where the challenge really lies.

[00:03:15] Ross Butler: But do we not need to distinguish between kind of general entrepreneurialism and business creation and scale up and all of that stuff? And then a formal institutional venture capital can presumably, you can have a thriving innovation ecosystem without necessarily a venture capital ecosystem. Is that true?

[00:03:34] Josh Lerner: Absolutely. And certainly we can think about the history of much of Europe as saying that when we look at many of the really critical technologies, everything from Internet to biotech, european academics and researchers were right at the front lines. In many cases, they were there first. The challenge that I think is pretty well documented for much of Europe has been really that translation of the innovation of the researchers with great ideas into businesses and ultimately into prosperity. And it’s really that translational thing of going from the innovation to the ecosystem, all the stuff that goes with it, where the intermediaries play a critical role.

[00:04:28] Ross Butler: And you make the case for state intervention primarily, I think, by looking at historical case studies, silicon Valley being an important one. People tend to think of Silicon Valley as the cutting edge of free markets. But as you explained, it’s not that at all. And in fact, I think to a large degree, in the early years, it looked like the kind of the R D wing of the US. Military. And to some degree, it’s still very closely related to that. But I guess the difficulty is the very limited number of case studies there are with regards to successful venture ecosystems. And so my question really is, and you are very nuanced in the book about this but what’s your kind of confidence level that let’s say in the next 20 or 30 years there won’t spring up a vibrant venture ecosystem in an economy that currently doesn’t have one, where there was no proactive state support or intervention?

[00:05:28] Josh Lerner: Great question. So I think one observation I’d make is that when you look around the globe today, it seems like every corner you look at, governments are doing policies to do stuff right. Certainly you look at things as diverse as Australia and the Emirates and Brazil, and you see very active policies to try to nurture high potential entrepreneurs and the intermediaries that help make them succeed. I should say that’s more than venture capital, right, that we’ve seen, particularly in the last decade or so, a lot of interest in trying to boost angel investors as well. And I think there’s often a sense that the angels will will wander where the venture capitalists fear to tread, right? In terms of I mean, in a way, when you look at many angels, they’re bright, sophisticated, successful people, but they also are doing this not just simply to maximize their bottom line, right? They’re getting some real enjoyment out of working with entrepreneurs, trying to in many cases try to boost the economic development in their place and they can really play that bridge role in the early stages. So we are seeing a very significant uptick in terms of the kinds of interventions that are there. We recently completed a project where we just looked up to the time of COVID and tried to identify all the programs we could find around the globe that were aimed at boosting entrepreneurial finance or the intermediaries that provide that capital. And our compilation came up with somewhere in the order of 900 such programs in the last couple of decades. Pretty much everywhere in the planet you look except for a few corners of Africa and the like did you look.

[00:07:31] Ross Butler: At how many of them had been successful or in your own subjective view, where has this been done?

[00:07:37] Josh Lerner: Know, I think you came in at the beginning saying it’s a little qualitative.

[00:07:41] Ross Butler: Right.

[00:07:42] Josh Lerner: And I agree with it know? Certainly when I feel when I’m asked, for instance, to give advice to a government or just give a talk, I always say a lot of what we’re doing here is not at the when we try to write an article, submit an article to the Journal of Finance, everything has to be at the 95% level of confidence right. With two stars and all the regressions. And they really like it when it’s 99% confidence. Right. Here we’re definitely in the realm where if we feel we’re 70% confident, we feel really happy that this is more often right than wrong. So there certainly is not real certainty on many of these things. But at the same time, when you look at data, you do see that some of the messages that I and others have been pushing that first of all, government intervention can make a positive difference at least in the right places at the right times. And secondly, that the provision of matching fund shack trying to get a signal from the market as to where the money should go is really important. Those two things are very much corroborated in the large sample studies as well.

[00:09:00] Ross Butler: Right, so I was going to ask you what are your key recommendations? Sorry, could you elaborate on those? So did you say you got to identify the need effectively? Was that your second point?

[00:09:11] Josh Lerner: Right, so I think certainly one of the challenges that public programs have faced has been this sense of saying let’s just go and do whatever the flavor of the moment is, right? That when you think about it, most politicians and most senior administrators are no doubt well intentioned but they’re not deep students of economics and economic development and even if you are a deep student in it, predicting what the future is is really hard right? So in a way to come in and say what so often happens is people look around at what other places are doing and just simply emulate what’s going on.

One example, of course, is biotech. I think an example I’ve used many times over the years is a paper by my friend Marianne Fieldman, where she documented that in the United States at the time she was looking, 49 out of the 50 states had programs encouraging biotech ventures, which were sort of predicated on the proposition that their state had some unique competitive advantage in biotechnology.

And the only one which didn’t was the Alaska, which had one where the former governor and former vice presidential candidate Sarah Palin abolished it on the grounds that it made no sense for Alaska in one of her few moments of really good public policy.

Right. When we look at that, you say that’s absurd.

[00:10:56] Speaker B: Because no doubt there are a number of places where having a biotech cluster makes sense, but 49 out of 50 is unlikely to be there.
And we’ve seen the same thing play out with clean tech and various other various other things as well.

[00:11:12] Josh Lerner: And when you ask the question of what’s right, it often is hard to say sitting in the ivory tower. But once you actually see it work in practice, it actually makes sense. So I remember one of the Australian states had put a big effort in terms of encouraging research in terms of life sciences. They had built all these fancy labs and he had a bunch of professors they had hired for big sums to come over and set up these facilities. But they were very frustrated because they were not getting the spin outs that were there. The spinouts that were coming out of those labs were either going to Sydney if they were good, and if they were really good, they were going to San Diego or San Francisco. And meanwhile, when you looked at saying, what are the startups that are doing really well and getting a lot of financing and market traction, it was things like using drones for low water agriculture software for the mining industry and stuff like that. In other words, companies that had some real rationale for being located there because of customer demand and being able to do really cutting edge applications. Right. And it’s hard to sit in the ivory tower and figure that out in advance, even if afterwards you say, AHA, that makes a lot of sense. And in a way that really sort of speaks to the power of market signals. In other words, saying, let’s see who’s sort of able to get traction there and then help those people get to the next level, rather than the more technocratic idea of saying, here’s our plan, and we say the answer is x. Right.

[00:13:12] Ross Butler: So the local dynamics is critical, but it’s very difficult even for politicians in that locality to know what they really are in advance. The lesson, therefore, presumably, is don’t be too specific with regards to your intervention and where you want the money to go and what you want it to specifically achieve. Is that fair enough?

[00:13:31] Josh Lerner: Absolutely. Right.

We just have thousands of examples of not just politicians who get it wrong, but even people who get it wrong about their own discoveries. We have across the way here the first programmable computer that was developed at Harvard during World War II. And there’s a famous quote from the professor who invented that like ten years later. They said, is this computer going to be useful for doing things like helping department stores send out bills? And he was like, if this computer, which we did to do calculations for developing the atom bomb differential equations ends up being useful for department stores, I’ll regard that as the biggest miracle in the history of humanity.

[00:14:21] Josh Lerner: So even there, the dude who had actually put this thing together, conceptualized this and put this thing together, couldn’t see around the next bend as to how It technology was really going to evolve. So in some sense to say to a public figure, oh, you figure out how all this sort of really complex stuff is going to bake out is.

[00:14:49] Ross Butler: That’s really the miracle of Silicon Valley, isn’t it? Because you made the point in your book and as I mentioned earlier, it’s very much one way or another, the military has either been a customer or a funder of ventures, but in another economy, that’s kind of where it would have begun and ended. But with Silicon Valley’s genius is to take whatever it is, global positioning systems and allow everyone to find their way, right? Yeah, go, absolutely.

[00:15:18] Josh Lerner: In a way that sort of serendipity or basically having just a ton of really bright people who aren’t afraid to fail and aren’t being punished for failing, being able to sort of play around in the sandbox and say, what is the next step that could be done with this? Fully cognizant of the fact that most of these ideas aren’t going to work out. But if one gets that right combination, it can be enormously powerful.

[00:15:50] Ross Butler: But I still come back to the point that it’s like there’s only one Silicon Valley and that’s true even in America. Like, if there were three or four Silicon Valleys, then maybe it would make sense for other countries to say we need one of these, but there’s one. It looks like a real anomaly. Maybe I’m being too cynical. Maybe there are other clusters that are smaller there and I don’t know, but from a layman’s perspective, it does look like a know, you’ve got America global power, you’ve got Silicon Valley, one cluster, end of story, and everything else is just miles behind. Is that unfair? I hope so.

[00:16:25] Josh Lerner: I think the answer is it is unfair. Right. If you looked at a chart of just a pie chart of venture capital and its allocation over the years exactly. If we took the snapshot as of 2001, and looked at it, basically the US. Would represent 85% of the pie. And once you added in the slices for UK, a little bit of France, Japan, Australia, Canada, right. You were basically at the mid 90s in terms of accounting for the accounting for the pie. And the whole rest of the world was just a tiny little sliver. Right. Today, when we look at it, or at least in 2022, what you see is the US. Is still the biggest piece. It’s probably 40 something percent in terms of the pie. But we’ve got any number of other slices of pie which are very significant. Obviously, China, the red slice, being quite big. But today India is representing close to 10% of the venture capital investment around the world. And we see significant clusters in a lot of other places as well, with a lot of the growth having taken place. Not so much in the again, when you look at relative growth because overall pie has grown, but the growth in the slice of the pie being most dramatic in the developing world in various places. So I think the view that this is just a game about the US. Or just a game that’s about Silicon Valley is mean. Certainly there’s still this sense of when you go within a particular country, when you go to Sweden and look around, right. The vast majority of the action is going to be in Stockholm.

[00:18:26] Josh Lerner: It’s still a game where there’s just a lot of what US nerds would call agglomeration effects, and we might just call lumpiness or stickiness, where people all want to be together with want to be together with each other. But when you look at the aggregate trend, it has really been to go from just one big lump to a series of lumps around the globe. Yeah.

[00:18:54] Ross Butler: Okay, well, that’s good news. So there is progress, and I’m being too cynical, and I’m glad to hear it.

So you could probably tell that I’ve recently reread your book because another point that you made, and you put this so brilliantly, and I hadn’t thought of it this way. It’s very simple. You basically say there’s a couple of ways that you can support venture capital. One is to create an environment whereby it thrives, and another is to increase the availability of capital, the equity gap type thing. And one, the former increases the demand for venture capital, as you say, and the latter increases the supply.

Which would you say is the most effective?

[00:19:31] Josh Lerner: Well, I think it’s certainly the case that you can’t have the one without the other. And in particular, I think there’s this sort of natural instinct that is, regardless of the political system, regardless of the culture or the religion, we see this natural inclination of political leaders to want to hand out big checks to people. Right. It’s just somehow, as a leader, that’s what gives you the warm and fuzzies in terms of saying I’m doing my job, I’m going to get lots of happiness and recognition for having done this. And one thing we can say with a lot of certainty is just that strategy of pill mill distributing funds without having done the hard work of setting the table, of making an environment that’s conducive to entrepreneurship is very unlikely to be successful. And yet we’ve seen this again and again. I think that there are any number of classic experiences along these lines. Probably with the Japanese being the most famous of policymakers who were bound and determined to create high potential venture VC ecosystem and said let’s just skip all the other stuff and go directly into dumping money into the entrepreneurial ecosystem. And as long as they were shoveling money into the system, there were people there willing to take it. But as soon as they had to because of financial pressures scale back the spigot, the venture industry just disappeared.

[00:21:18] Josh Lerner: And in a way it was an artificial industry that was being propped up by the public funds. And you say why was that? Are Japanese people not entrepreneurial? Are they not smart? Are they very smart? And certainly you walk around downtown Tokyo and you see big signs saying Toyota and stuff like that and these were real entrepreneurs who created companies out of nothing and created tremendous wealth from it. But that being said, for much of the period the government was trying to do this boosting of the venture sector. It was an environment which was really stacked against the entrepreneurs. First of all, of course the labor market. You could quit your job at Mitsubishi, but once you quit there was no way back in, right? Which really raised the barriers to going and starting something. You were definitely burning your bridges behind you. The tax laws, the labor laws, a 1001 other things were sort of rigged in a way that really made it unfriendly to be an entrepreneur and where it was a real struggle as a result. And I think again, why didn’t the government address that? Well, a lot of that was really hard, right? We know that anytime you sort of have regulatory or policy reform there’s lots of vested interests yelling and pushing in a bunch of different ways. In some sense it’s a lot easier to say we’re just going to go hand out funds. But I think that really has to be the first step.

[00:23:00] Ross Butler: Do you have a view on what’s going on in Europe and the EU’s initiatives to support venture capital?

[00:23:06] Josh Lerner: There’s certainly been a lot of money handed out by European Investment Fund and others and certainly there’s been some significant changes, positive changes in terms of some of the table setting kind of stuff, right. So if you think about a couple of decades ago in a place like not just Italy, but even Switzerland, you had this sort of extremely unforgiving regime in terms of treatment of failure. Right? As I understand it, the extreme form of that was not only were as an entrepreneur, if you were an officer of a company which failed, were you banned from being an officer of another company, but even as a board member you basically were hexed from doing that, right? Which of course, no doubt if you were sitting at the Swiss Business School and some student came to you saying will you be on the board of my startup?

Your answer would be no.

So, you know, there’s certainly been some positive changes in terms of some of these areas. And certainly you look at many corners of Europe. We talked about Stockholm already, right, where you do see a lot of this sort of virtuous cycle. And I think we could put London in the same category, where you do see just much more development of an entrepreneurial culture and process. I think on the other side you could certainly ask an impolite question which is given the massive investment of public funds, has the return on investment been as high as it ought to have been? And I think there my answer would probably be no. And if I was to highlight one issue or one problem, it seems like in many cases they’re starting off with a big lump of butter and then spreading it super thinly over I don’t know what the number is now 28 or 27 pieces of toast. And even on each piece of toast they want to put some money up in northern Lapland and some money out in the extreme western end of a country and so forth, right?

Even at a country level, rather than putting one pat, there’s this tendency to want to spread it out extremely broadly and in some sense that’s appealing, right? It’s sort of fair. That why let one place get all the goodies and other places not get the goodies, right? And in particular, you might argue the need for economic development is probably way higher up in northern Lapland than it is in Stockholm, where people are pretty prosperous and happy. But it ends up being really counterproductive because once you get that 1000th of a millimeter layer of butter spread all across the board, you can’t taste it and it doesn’t have any kind of real positive effect.

[00:26:21] Ross Butler: Right.

[00:26:21] Josh Lerner: It basically ends up ignoring the lumpy nature of this process. And I think that’s to some extent cut against the efficiency with which money has been spent.

[00:26:35] Ross Butler: So just as an aside, back in 2010 I was working actually at the European Private Equity and Venture Capital Association, which is now called Invest Europe. At the time we put out a venture capital white paper so we all read your book and we had a chap on to comment from the EIF called Thomas Mayer. And so the conclusion that Thomas and we came to was kind of precisely what you just said. And the solution that one of the solutions we put forward in the White paper was it was mainly focused on what you’re saying, increasing the conditions to increase the demand for venture capital, but also to try and take the source of public funds one step removed from the EIF. So you create a kind of a fund of funds and that allows the market to allocate to pick the winners rather than it was still online if anyone’s interested in reading it, but that was where we got to. But obviously Europe’s difficult because it is.

[00:27:27] Josh Lerner: Intensely political, obviously, but certainly I’m very sympathetic with this notion of saying to put as much distance between the politicians on the one hand and the entrepreneurs on the other is, I think, a great guiding principle. You know, when you think about some of the efforts that have been successful, albeit at a sort of smaller scale, so you can think about something like New Zealand Venture Investment Fund. They tried to create a body to take the public funds and allocate. It where they put a real moat around it to influence the process of somebody from Parliament calling up and saying my brother is trying to launch a fund and can you talk to him? And all that kind of shenanigans that we know is all too often the part and parcel of the process. I mean, this is not a popular message pretty much anywhere in the globe. I remember once testifying before some Senate committee and some very distinguished and reputable senator from somewhat far corner of the Wild West said this is just a sign that you’re a Harvard elitist who just wants you kind of people on the coast to do really better and don’t care about us. And with that kind of framing, you knew the conversation was not going to go terribly well.

[00:28:48] Ross Butler: Well, good for you for putting out unpopular messages because someone’s got to do it.

Have you been following so I’m currently in London, just had something called the Mansion House reforms where our government has encouraged British pension funds to allocate significantly from a very, very low base anyway to private capital in general. And obviously the press release focuses on venture capital. Have you any thoughts on that kind of corralling of local institutional investment vehicles into the sector?

[00:29:18] Josh Lerner: I must admit I’ve got a fair degree of caution there and again, you can say this is simply anecdote, but we have had a number of experiences in the past. I think one of the great case studies was that of the experience in Australia in the early 2000s where there was a real effort on the part of the government that was in charge then to strong arm the super funds. Basically the pension funds, which are massive due to the mandatory savings that they have in Australia to put money into local venture funds. And again, it was well intentioned in terms of what they were trying to do, but it was a situation where the industry itself was extremely young in many cases. Not that the people running the funds were not that good and where certainly it couldn’t accommodate the kinds of funds that the super funds were being asked to put into it. And the results were bad in the short run, which is to say a lot of money got put into these nascent venture funds which weren’t able to wisely invest it and ended up with basically a lot of money being wasted. But the real consequences were in not just the few years afterwards but really the decades afterwards. It just created this extremely bad taste in the mouth of the super funds around doing venture type investments, particularly locally. And they were like maybe we’ll give a little money to Carlisle or KKR but we’re certainly not going to put any money into any aussie bloke who shows up here talking about doing venture capital here.

[00:31:08] Josh Lerner: And it became counterproductive right? In the sense that they were so negative on this that it almost became an active aversion to doing venture investing and unwillingness to say the market is very different today than it was 15 years ago. That’s sort of gradually changing but it really had an unintended consequence and a very long hangover associated with it.

And I worry a little bit that I think it’s often very tempting on the part of policymakers to look around and say here’s a big pot of money, let me just solve my problem by reaching into it and using it over here. But I think that without really making sure that there’s an attractive set of ventures out there, it can be pretty problematic.

[00:32:04] Ross Butler: It’s not just tempting for the politicians, it’s also, I think, tempting for the industry itself, of which I kind of count myself as part. And with these Mansion House reforms people have been going around giving each other high fives. There’s this massive rush of capital coming into the industry. That’s got to be good news. I’m a big believer in the power of private equity. But I’m asking you this line of questioning because, of course, there is another side to it which is a little bit more concerning, which is maybe long term this is a risk. And that the press release that the government put out put some really was very specific about how it was going to improve the performance of British pension funds. Governments can say that kind of thing, private sector institutions can’t. But it’s certainly I think it is a bit of a concern. But you can understand that the industry is all for it because they can’t change the wider environment. One thing they can do is change that. They can lobby very narrowly for more funds for themselves. And so there aren’t that many people kind of sitting on the sidelines calling for kind of the bigger picture and a little bit of caution.

[00:33:10] Josh Lerner: Certainly this is a chicken. And egg problem and anything that can sort of shortcut that conundrum is obviously appealing. But I think one ends up being keenly sensitive after looking at enough cases to this sort of law of unintended consequences and how things that seem appealing end up can come back to bite one.

[00:33:33] Ross Butler: What about patents? I see you’ve done quite a lot of extensive work on the importance of patent regimes in order to spur innovation. What’s the situation there in the US and elsewhere?

[00:33:46] Josh Lerner: The good news with patents is that they really do allow one as an entrepreneur, or even a proto entrepreneur, to get protection for one’s idea and be able to use that protection to more confidently go and approach corporates for strategic alliances, potential investors and the like. And there was a very intriguing paper by some academics here in the States as well as in Sweden, where they looked at entrepreneurs who got slightly bigger, broader patents and slightly narrower ones, but where it was really much more a function of which patent examiner was doing the review of the patent more than anything else. And what they showed is that those entrepreneurs or those proto entrepreneurs who got the broader patents ended up being more successful subsequently, really, again suggesting that patents can be a really positive thing for entrepreneurship, given just how challenging the position you are starting off is.

On the other hand, and sadly, there always is another hand, right? We’ve also seen some real abuses in the US system, right? And this has been much we’re at the extreme end here, but the sort of patent gamesmanship of people basically often self styled entrepreneurs, but who are basically doing nothing besides litigating patents. And if you’re an entrepreneur trying to build a real company and you get a letter from one of these persons, it basically is framed as give me $50,000 or I’m going to sue you. Right? And in most cases, picking up the phone and calling a fancy patent attorney, the first click on the taxi is basically $50,000, right? So they’ve configured it in a way that it’s often considerably cheaper to just give them the money and have them go away rather than fight this thing. But the consequence is, of course, that it becomes a self perpetuating kind of thing, almost an innovation tax. So there really is both this bright side and this dark side. There and again was American public policy. A little bit more together, we would have figured out ways to try to accent the positive and downplay the negative.

[00:36:24] Ross Butler: So there’s no easy answer with regards to kind of IP law. And there’s nowhere in the world that you think are particularly kind of a good case model.

[00:36:32] Josh Lerner: I think Europe is better, if only because I think the quality of the examination system I think one of the big issues here is that not only are patent examiners not paid very much, but they’re under tremendous pressure in terms of quotas to get throughput in terms of this. So even if you get a patent, you sort of think it’s wrong or problematic, so forth. You’ve got your boss looking at your computer output and saying you’re not moving fast enough here, right? Even if ultimately that patent ends up doing hundreds of millions or billions of dollars of distortions to the economy, you’re under your pressure to do your 8 hours in that patent and go on to the next one and the next one and the next one. So it’s certainly a system that is ripe for a little bit of improvement.

[00:37:24] Ross Butler: So I noticed from your bio that you graduated from Yale and you looked at physics and the history of technology and the reason I bring that up is that, well, I’ve been thinking rather a lot recently about the scientific endeavor for good and for bad. And there’s the new movie out, isn’t there? The Robert Oppenheimer movie, which I haven’t actually seen. There was this phrase, not so common now, but a few years ago in Silicon Valley about move fast and break things and it’s know, just innovate, innovate, innovate and something good will come of it. And I just wonder if you’ve got any views on that and on the scientific endeavor and its dangers and our ability to, I don’t know, apply I’m a venture capital to apply kind of an ethical caution to innovation.

[00:38:15] Josh Lerner: It’s a great question. I teach a class for undergraduates over in the engineering school and certainly I’m surrounded by youthful founders who are not spending deep amounts of time contemplating the implications of what they’re doing, right? But I think when we sort of step back and say how do people get into trouble? Right? In particular, when we look at many of the boneheaded moves made by some of the most successful entrepreneurs, at least in our country, you say, how is it they were so blind and not thinking through the broader picture? And a lot of it is because a they probably just studied technology and we’re like, we’re not going to bother with those sort of soft kind of classes where these painful, complicated questions that can’t be resolved with a few equations lurk, right? And B they’re under whether self inflicted or inflicted by the outside pressures. They’re under so much time pressure that they’re never stopping to sort of step back and think what is this? What can go wrong? And so forth. And in some sense, clearly you’re never going to have a situation where you have entrepreneurial venture as a think tank where everyone’s spending months and years contemplating every ethical application of these things, right? There’s always going to be an element of experimenting just simply because by the time you know the answer, the opportunity is too late. But at the same time I think that it’s absolutely essential to have some of that awareness and this willingness to question baked into the entrepreneurial system. And I think those who have neglected know in many cases it’s ended up coming back to haunt them at some later point.

[00:40:27] Ross Butler: I heard this really scary story about I think it was in Princeton and there was an experiment going on with regards to gene editing, and I think it was CRISPR technology. And it was only by accident that one of the students came in over the weekend and realized that it was turning everything to slime. And the professor was reported as saying that if it had leaked out, it may have ended terrestrial life on Earth, all green life. And it’s like, oh, well, that sounds dangerous.

So great. Look, professor, thanks so much for sparing your thoughts and maybe you come to London next year and we’ll kind of pick up where we left off because there’s lots more to talk about.

[00:41:07] Josh Lerner: Absolutely. I’m really looking forward to act two. Thank you so much for the invitation to talk about all this stuff.