With federal support, the US can recreate Silicon Valley success nationwide
If any single element defines the magic of American free enterprise, it’s that none of us can say for certain which new idea is going to lead to the next technological breakthrough. That mystery opens worlds of possibility.
As you read this, someone is tinkering with an idea that will spark the next Google, Intel, Qualcomm, or Dell. But we don’t know who and we don’t know where, because lots of people are trying a whole variety of different ideas. To make the most of that miraculous uncertainty, America was once responsible for more than 60 percent of global research and development, dwarfing the rest of the world’s various investments. No one knew during the postwar era precisely what might come of the dollars Washington was sending to a relatively unknown federal agency called the Defense Advanced Research Projects Agency, or DARPA — but among the agency’s many bets, one of its investments blossomed into the internet. The rest is history.
Unfortunately, over the last several decades, as domestic wellsprings have tapered and other nations have ramped up investment, America’s share of global R&D has fallen to 28 percent as of 2018, according to Congressional Research Service.
It’s not just that the government has curtailed research funding by cutting the budgets for the National Institutes of Health, the National Science Foundation, the Defense Department and other research agencies. It’s that private venture capital has evolved to focus on a small handful of startup ecosystems, namely in Silicon Valley, Boston and New York. That has left huge swaths of the American public frozen out of opportunities to contribute their ideas to the marketplace of American innovation even as global competition heats up.
Fortunately, Washington is now beginning to wake up to this challenge, as evidenced by the new focus on the nation’s infrastructure, including rural broadband. What’s crucial today, beyond simply restoring systems that have been neglected for decades, is that we begin making investments that seed new innovation-oriented jobs outside the handful of coastal locales already awash in entrepreneurialism. A host of communities across the country boast all the constituent elements required to reap the fruits of technological invention — but as a nation we’ve yet to shape them into the hubs they’re poised to become. We need to act before we lose the opportunity to fire new engines of American innovation in places like Indianapolis, Detroit and Columbus.
A new bipartisan bill has emerged to do exactly that. Senators Chuck Schumer (D-NY) and Todd Young (R-IN) have worked with Reps. Ro Khanna (D-CA) and Mike Gallagher (R-WI) to craft The Endless Frontier Act which, in addition to authorizing $100 billion for a new directorate focused on R&D and commercialization at the National Science Foundation, explicitly directs $10 billion to the Department of Commerce to make investments in places on the cusp of establishing themselves at the forefront of a new, more expansive, wave of innovation.
Here’s how it would work: The Commerce secretary would designate, through a competitive process, ten to fifteen new innovation hubs poised to combine the intellectual capital found at universities, the entrepreneurial vision that fuels start-ups, the capital resources to experiment and learn and a workforce equipped to bring ideas to life. Each hub would receive an infusion of federal capital to be used for R&D, workforce training, entrepreneurship and manufacturing. Resources would be controlled by consortia in each hub consisting of a mix of universities, local, tribal, or state governments, labor organizations, national laboratories, financial institutions and venture development organizations. Silicon Valley clearly already has this critical combination of stakeholders working together, but its momentum originated, in part, as a result of government support. This new legislation, which promises to bring real money and leadership to bear in places that are on the cusp of taking off in earnest, holds the potential to put the nation as a whole on an entirely new footing.
The regional tech hubs would ensure that government investment in R&D reduces the geographic opportunity inequality that has grown rife in the U.S. over the last generation. According to the Brookings Institution report, The Case for Growth Centers, between 2005 and 2017, just five metropolitan areas generated 90 percent of the country’s innovation-sector growth. That has driven a wedge between the handful of cities where highly skilled workers tend to concentrate and the remaining regions, which the report warned might otherwise fall into “traps of underdevelopment.” The bill is also poised to go a long way toward leveling the playing field for female and minority entrepreneurs who will be positioned to take advantage of new educational programs funded explicitly to broaden opportunity.
Combined, the package will work to powerful effect. Stark regional, racial and gender-based divergences are not only economically inefficient — they’re morally wrong. Access to the American dream should not hinge on what you look like or where you live. If venture capitalists can seed innovative companies, the government should be able to seed innovative communities. And that’s the point.
This is Washington leaning into the process of entrepreneurship. Government can’t mandate innovation — but public policy can create the seedbed for new ideas, pushing forward technological advancement in areas markets won’t independently address. In doing so, policymakers and others must be intentional about bringing the constituent pieces required to harvest new technology together in places outside the coastal tech hubs. Startups are responsible for nearly all net new job creation in the U.S., meaning this is a big part of what we need to build back better.
As I’ve discovered through the Rise of the Rest, Revolution’s long-term initiative to invest in and nurture start-ups outside the traditional pockets of technological innovation, talent is equally distributed across the U.S., but capital and opportunity are not.
The Endless Frontier Act will serve to put much more of America in the innovation game. By taking better advantage of the nation’s deep well of entrepreneurial assets, communities blessed with universities, leaders, know-how and talent will have opportunities to shape America’s collective future.
Steve Case, a cofounder of America Online, is chairman and chief executive of Revolution, a Washington D.C.-based venture capital firm. Revolution’s Rise of the Rest is a nationwide effort to shine a spotlight on emerging startup communities. Case is also the author of “The Third Wave: An Entrepreneur’s Vision of the Future,” and a member of the Executive Council at TechNet.