An Innovation Agenda

If there’s no room left for big, heroic ventures in Washington, there’s almost too many of them to go around in the Valley.

If there’s no room left for big, heroic ventures in Washington, there’s almost too many of them to go around in the Valley. (Photo: unfocusedbrain/Flickr)

Here’s a popular joke: We can put a man on the moon, but we can’t…insert your favorite public problem here. Fix potholes. Speed up service at the DMV. Repair healthcare. It’s a time-honored quip, but it speaks to an issue of contemporary relevance: How is that a government that seemed so capable of big, heroic ventures in the 20th century seems to barely function in the 21st?

I have a particular vantage point on this question: I’m a Silicon Valley-based entrepreneur and investor. If there’s no room left for big, heroic ventures in Washington, there’s almost too many of them to go around in the Valley. It’s easy to pillory these efforts, but entrepreneurs in Silicon Valley are still asking questions that would, I imagine, sound outlandish in many corners of the world. For instance: Could we, once and forever, cure cancer? How do we put a person on Mars? Could virtual reality transform education? Could we invent entirely new forms of energy? In our neck of the woods, these aren’t idle thought experiments—they’re actual businesses.

In one sense, what’s important isn’t that Silicon Valley is working on big problems. What’s important is that the approaches that have been developed here can be applied beyond our corner of the world. It’s too facile to say that Washington could stand to learn a thing or two about innovation, but I do think the leaders of the land would benefit from a more careful study of what makes businesses rise and fall in Silicon Valley. Caricatures of tech culture abound, but they tend to reflect the way the process looks from the outside in, and they flow from a surface-level understanding of what actually happens here. They miss something crucial: Silicon Valley has become the place it has the hard way, and the lessons it has learned—about how to use resources, how to innovate, how to fail, among others—are useful outside of a few zip codes in San Francisco.

Washington, of course, has taken to importing these insights through a simple and somewhat blunt instrument: hire technologists and put them in government positions. The problem with that approach is that simply moving minds from San Francisco to Washington misunderstands how Silicon Valley works. A handful of techies airdropped into the executive branch can’t offer a full picture of what goes on into creating and scaling a mission-driven enterprise, nor can they enable the kind of paradigm-shifting changes I’m sure their bosses are eager for. Put more simply: Technological minds are only one part of the Silicon Valley story. It’s the interplay of technologists with entrepreneurs and business leaders, as well as a cultural bent toward problem-solving, that forms the heart of the Valley’s success.

But there is, I’m convinced, a way to bring that kind of thinking to Washington, DC. So, in that spirit, here are a few observations about what we’ve learned on this coast that might prove useful to leaders on the other one:

Build a bug-fixing culture. If it were truly just a handful of coders that built big companies, then Bangalore would rival San Francisco as a mecca of start-up creation. But it doesn’t, and there’s a key reason for that: ideas born in Silicon Valley don’t emerge in a vacuum. They come into being inside a culture.

There are, broadly speaking, two types of companies in Silicon Valley: feature-obsessed and bug-obsessed. Apple is a paradigmatic case of a feature-obsessed company, always striving to put the next unique product into the world. Then there are the bug-obsessed companies, which identify some multi-billion dollar problem in the economy and set out to fix it. These bugs can vary, from the way the mortgage-backed security space works (the bug that caused the 2008 financial crisis) all the way to how health insurance is administered. Blend Labs is an example of a company going after the former; Oscar is attacking the latter. Both are bug-focused companies, and both are attempting to change intractable, complex industries.

Bug-obsessed companies see how the world works and believe it can operate 100 times better with technology. These sorts of enterprises are made up of, unsurprisingly, bug-obsessed individuals, people who find a problem and then can’t quite shake it. Sometimes these people are engineers, but, just as often, they are not. What they can do is see a problem and identify the ways in which technology might fix it. What they do is set a vision of how things will look once things are fixed—which is to say, they sketch out a picture of the possible, confront the challenges to making it a reality, and build teams to make it so.

What does all this mean for Washington? For one thing, our leaders would profit from bringing in a broader range of voices into the councils of power—the investors and entrepreneurs who are behind Silicon Valley’s biggest successes. But more than that, it’s worth appreciating that some of the biggest technological changes of our time happened because someone simply identified something amiss—and then worked like mad until it was made right. Something of that spirit and vision, I suspect, would go a long way in the Beltway.

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Allow for failure. If there’s one curiosity about Washington that stands out to minds in Silicon Valley, it’s the way the government allocates resources. Projects and programs are easily created—but not so easily jettisoned.

Consider, for instance, the Department of Agriculture. Established 155 years ago by Abraham Lincoln, its original remit was to provide federal support to working class farmers, at a time (1862) when farmers represented a big part of the workforce. Fast forward to 2016: the Department has ballooned in size and still provides billions in subsidies—despite the fact that farmers occupy a narrow sliver of the workforce. Consider the stats: In 1900, 2,900 workers at the Department served 11 million American farmers; today, there are only two million farmers—but a staggering 93,000 Department of Agriculture employees. The budget for the Department is an eye-popping $139.7 billion dollars.

Which leads us to a natural question: Huh? How can this be? If the Department of Agriculture is less necessary now than it’s ever been, then why is it bigger than ever before? This is the kind of innocent question that causes eyes to roll in Washington, but causes heads to scratch in Silicon Valley. Surely, we wonder, there has to be a better way to put this much capital to use?

While there’s no single prescription for this problem, nor even an agreed-upon diagnosis, I do think a shift in how we think about the problem is in order. It begins with acknowledging that how a program or project ends is as important as how it starts. In the technology culture, businesses fail all the time—which is to say, businesses are allowed to fail all the time. That isn’t without some damaging consequences: People lose jobs, investors lose money, entrepreneurs lose confidence. But the very fact of this failure is what keeps progress going.

It’s simplistic to argue that government should become more like the business world in this regard. Failure may take on a different form in government than it does in the world of enterprise; the consequences may be assessed differently. But at the moment, I simply don’t see any serious discussion of how failed programs can be led to a soft landing—a vital aspect of Silicon Valley culture that might be imported into government in a more serious way.

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Think hard about incentives. Money in the Valley follows a familiar path: investments flow to promising ideas and people, and the return on those investments is, more often than not, re-invested in other promising ideas and people. The stakes can be modest (angel investments) or large (venture capital backing), but the flow is fairly well-established. And it exists to align incentives in a way that benefits everywhere, investors and entrepreneurs alike.

There’s almost no more puzzling part of government than the way in which regulations create perverse incentives. It is a wonder to many of us in Silicon Valley why energy utilities, for instance, cannot adopt new sensors and machine learning technologies, which could lead to billions in savings for consumers. Or why the regulatory architecture in the drug manufacturing world is as risk-averse and paralyzed as it is, at the cost of potentially thousands of life-saving advancements. Or why the education system seems so hopelessly outmoded—and unable to improve itself. All of these individual issues, of course, are a species of the same problem: misaligned incentives.

The examples abound. There’s no spur for efficiencies or savings in the energy industry, for instance, and powerful, narrow interests ensure that the status quo remains so, regardless of who is in office. Drug manufactures benefit mightily from the way regulations work right now. The Post Office, by all appearances, has struggled for years to make itself profitable and functional. The VA can’t seem to ever clear the backlog of cases it has to address, to the great detriment of the military service members it’s supposed to aid. It all makes perfect sense—while at the same time making no sense at all.

I don’t just believe that this operates at the systemic level. It’s more personal than that. One of the things that powers Silicon Valley is a sense that a single success isn’t enough if you’re an entrepreneur; those who are successful in building a company or backing a venture are encouraged to keep going. There are financial benefits, to be sure, but the successful Silicon Valley types continue to build things for more than just a paycheck. It’s hard to imagine, outside of a very select few at the top who rotate in-and-out of high-profile jobs, that a culture exists in which a government official can be amply rewarded for their successes.

Partly, I suspect, this is because of murky performance indicators. Part of having the right incentives is having the proper process to measure and track successes and failures. One of the underlying principles in the business I run now is transparency: We want to know the good, bad, and especially the ugly of the businesses we invest in. For all the progress made on initiatives like data.gov—a worthy effort to at least give some window into government programs—it seems like this particular push and initiatives like it are more about putting data into the world, rather than tying data to any particular desire for performance. Metrics matter, and they are used to hold our organizations accountable, which is a crucial part of the Valley’s culture of creating appropriate incentives for people and systems to succeed.

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Embrace small teams. Big Silicon Valley companies can give the impression that the scale of the team is determined by the scale of the problem. But that’s not quite right, and the way we build teams is a part of Silicon Valley’s architecture that could be better understood—and copied.

Here’s how big ventures usually begin: an entrepreneur identifies a multi-billion dollar inefficiency in the economy. They pull together a handful of talented engineers and data scientists together to see what they can do. The whole team gets smart on the problem—quickly—and by the time they start, they are often PhD-level experts in the topic, the competitors, the regulatory environment, and everything else about the problem.

Sure, that’s a simplified version of how these kinds of teams come together, but it isn’t too much of an exaggeration. Teams like that have helped to figure out how to stop terrorist attacks, allocate billions of dollars of state and local government resources more efficiently, and even bring down the price of prescription drugs 10x for the underinsured. The lesson is simple: Big problems don’t necessarily need big teams—though the government’s size and scale might lead you to believe otherwise. In truth, we hire when we have traction on a problem; and often, companies in this area of the economy don’t hire if they don’t need to, knowing full well that a handful of keen business people paired with a handful of hackers can solve big problems on their own.

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One of the more common thought experiments given to new entrepreneurs is the following: How do you 100x your idea? This can mean many things depending on the context. What will your venture look like if it scales 100 times larger than you anticipated? How can we make this concept 100 times more successful? The question has at its root a kind of rarefied ambition, a vision that’s designed to push thinking in ways that make many people uncomfortable—but that serve as a powerful spur for the most committed entrepreneurs.

So, could we change government in ways that would improve it 100x? I confess: Talk of “change” in 2016 can ring hollow, and “innovation” in government can seem like a contradiction in terms. But I’m nothing if not optimistic that changes and innovation are still possible in government, if only because I’ve seen them happen in micro and macro ways in the world of technological entrepreneurship. Where these things begin is with first principles: concepts like failure, incentives, and culture.

They also begin, I think, by embracing the kind of ambition that powers Silicon Valley. Sure, cynicism is easy, and overheated political rhetoric can turn us all off to the possibilities of government and to the problems of waste. Throwing up your hands, writing off all politicians as crooks, and the government as irreparably and irredeemably broken is a natural response to what we’ve seen so far.

But technology has changed massive industries, including many that were thought to be set in stone. Intractable, impermeable areas of our economy—infrastructure, healthcare, logistics—are all undergoing massive transformations, and thanks in large measure to entrepreneurs asking questions about how things might be done differently. Teams of people are going up against risk-averse industries—and are winning.

So if the goal—making Washington more innovative—seems grandiose and far-fetched, then that’s precisely how it ought to be. If Silicon Valley’s successes teach us anything, it’s that getting even a fraction of the way to a grandiose idea can often leave something of real and lasting value, or provide a model that inspires the next creation or innovation.

Or, to put it differently: If we can put a man on the moon…

Joe Lonsdale is a Partner at the venture capital firm 8VC and Founder of Palantir, Addepar, and OpenGov.