I want to thank especially all of the elected officials and their staffs who have participated in this process and who have demonstrated a great interest in the results that will come from our deliberations. Gov. Romney, Mayor Menino, our state’s congressional delegation. Congressman Capuano, in particular, who will be here in just a few minutes.
Everyone, I think, recognizes that the task of being university president is not an entirely easy one. But of the various aspects that are difficult, the one I’ve come to be most struck by in the last few months is that the job calls for you to go speak and visit with many different groups, and those groups have almost nothing in common. Sometimes they’re concerned with issues like this, sometimes they’re concerned with the future of religion, sometimes they’re concerned with progress in the humanities. I used to think there were no similarities in the various groups I met with. I now realize there is one similarity. On each and every occasion, everyone in the room knows more about the subject on which I have been asked to speak than I do. That makes this not entirely easy. Certainly everyone here knows more about the life sciences, knows more about the economy of the Boston area, or knows more about both of those things, than I do.
So I thought what I would do is just make a few comments on the genesis of this conference, make some observations on what it seemed to me was at stake, try to share with you some things that I think economists know, that I think are relevant to our discussions, and then reflect briefly on a number of things that the University will be doing going forward.
This conversation had its genesis in a conversation that Mike Porter and I had over a year ago that, in turn, had its roots in conversations that Mike had been having with Chuck Vest and many of you over a long time. We spoke about the economy of this area. We spoke about some of the things I was trying to emphasize at Harvard involving the development of science. And we spoke about what is one of Mike’s distinctive areas of expertise, the importance of clusters.
Mike said that while a great deal of thought had been given to questions relating to the life sciences and to this area, he felt that there was something very important that could be done analytically in terms of cataloguing our weaknesses and building on our strengths. And there was something that could be done very importantly, practically, by bringing together people who were major stakeholders in the success of this cluster. It is out of those conversations that I came to be very supportive of this initiative, and it became clear to us almost immediately, as I think it was clear to Mike from the beginning, that given MIT’s tremendous strength in the life sciences and given MIT’s great historic strength as a contributor to the economy of this area through its work in science and technology, that this was a venture best entered into jointly.
Why? The stakes. We are at a moment, I’m convinced, of unique promise in the sciences generally, and particularly in the life sciences. Some of it must have to do with the recent success in sequencing the genome. Much more generally, it has to do with the intellectual developments of the last 25 years, last 50 years, that provide a platform that is unprecedented for further efforts at discovery, and the fact that, increasingly, we are at a stage where we can develop therapies for disease that are based not on trial and error, but are based on rigorous deductive methods. You will hear more about that in the course of this conference.
Indeed if one looks at what has happened to life expectancy, what has happened to the availability of therapies in our country and around the world, I’m convinced that when the history of the time we all were alive is written 200 years from now, the largest story in that history — well, one of the couple of largest stories in that history — will be the ability of mankind for the first time to comprehend human nature, to operationally influence human nature, and to develop on a scientific basis pervasive modes of preventing and curing disease.
At the same time, it also is clear that institutions like Harvard, like MIT, are increasingly important to our national economy and to the global economy and to the regional economies in which they operate. John Kenneth Galbraith observed a few years ago that universities are to the 21st century economy what banks were to the 20th century economy. They are the place where the important kind of capital is, and is made available. Surely if you look at any accounting for economic growth in recent years, you find that the large debate is about how much of it is due to the increase in human capital and how much of it is due to the increase in technological capital. But either way, universities have an absolutely central role. And if one looks over time, one finds the relative importance of human capital and technological capital is only increasing.
One also finds, in the success of universities, clear evidence that some of the greatest academic successes of recent decades have come in contexts where a virtuous circle was created. A virtuous circle is the opposite of a vicious cycle. A virtuous circle is a situation where universities are spectacularly successful in what they do. That contributes to local prosperity. That local prosperity makes the university community a more attractive place to live. That prosperity contributes to the prosperity of the university. That builds greater strength of the university. That builds greater local prosperity. So it is not just an abstraction for science, humanity, and the national and global economy, but a reality for the success of our institutions and the success of this area — how we exploit our progress in the life sciences.
There are some things economists know that actually are different — or maybe I should say economists think — that are different from the things that economists thought they knew 25 years ago that I think are very important in addressing these issues. Let me highlight several.
The first is the principle of increasing returns in knowledge-based industries. Classical economic theory is all about diminishing returns and smoothness. If you have a plot of land, the first person who farms the land will add more value than the second person, and the second person will add much more value than the fifth person. Therefore, if you have a large area, the way in which it will be farmed most efficiently is for people to spread themselves evenly across that plot of land. That is a very attractive theory and it actually has a good deal to do with agricultural economics. One of the most important types of research Mike has done is the demonstration that that theory has almost no predictive power for most aspects of the location of industrial activity. For most aspects of industrial activity, and especially for aspects of productive activity in which knowledge plays a crucial role, the right law is exactly the opposite. It is the principle of increasing returns. And it derives from this consideration. If you have two biologists, there is one possible two-way combination. If you have 10 biologists, there are 45 possible two-way combinations. And so the possibility of synergy, of interchange, of sharing knowledge increases more than proportionately with the existing scale.
What does that have as a corollary? It has as a corollary that the marginal impact of one more scientist, one more thinker, one more manager in an area going to a place where there are already substantial strengths is greater, not lesser, than going to an area where there is weakness. Or in short, in these areas, it is important to build from strength rather than to reflect weakness. And of course, as you’ll see in the course of this conference, we in this area have enormous strength, and that makes attracting resources to this area at the margin more important than ever before.
The second thing we know, and at one level it’s something economists have talked about for a long time, but I think we appreciate it in a different way today, is the principle of the division of labor. It’s been understood since time immemorial that if you want to produce a car, having each person produce their own car is a less efficient way than dividing the task into multiple parts and allowing each individual to perform their part and develop expertise in performing their part. What we are coming much more to appreciate is that that principle of the division of labor which applies at the level of individuals in a given production process also applies much more generally socially at the level of achieving broad objectives.
There are things that universities are uniquely well-suited to do because of our endowments, because of our ability to attract philanthropic resources, because of synergies with the scientific mission. We are well situated to carry out basic research in a way that’s very difficult for for-profit companies to carry out basic research. At the same time, we in universities are very poorly situated to bring products to market, to execute a whole set of tasks that are enormously socially important. And therefore, it is important to the success of this scientific enterprise that it be carried on by many different kinds of actors with many different kinds of incentives in close proximity to one another. There’s a classic ecological metaphor — ecosystems that are varied very consistently have far more survival power and are far more successful than ecosystems that are homogenous. So it is with economic systems in a given area.
There’s a third implication, and I think it’s a very important one and it’s quite related to that principle of the division of labor, and it is this: it is the principle of diversification. As a financial proposition, it is self-evident that you should not put your eggs all in one basket. Or to take a more subtle point, if you are able to diversify, you will find it possible to take greater risks on individual investments than if you are not able to diversify. So it is the irony of financial diversification that it on the one hand makes individuals’ wealth position safer and it is on the other hand possible for individuals because they can diversity to make investments that they would find far too imprudent if they had to put a substantial share of their wealth in a given investment. And that principle of diversification, too, applies to a successful scientific enterprise.
While many in the public see the Manhattan Project as a kind of quintessential scientific enterprise of success — there was a clearly stated objective, there were a couple of people who were in charge, there was a very large research program, it involved everything from theoretical physicists to engineers — the history of science is brutal in demonstrating that that is very much the exception that proves the rule. Almost every other attempt to have a Manhattan Project to achieve an objective has been unsuccessful. And almost all of the successes have come from flourishing, diverse scientific ecosystems of the kind that we’re trying to create here.
There are complex debates, in which I am not an expert, on the question of why the information technology economic revolution of the late ’80s and 1990s did not happen in Massachusetts despite the tremendous base we had established on Route 128 in the 1970s and early ’80s, and everyone in this room will have their own view about it. My own guess is that the single most important factor was that we had come to be very specialized in the microcomputer, and when technology moved in a somewhat different direction, we were obsoleted quite rapidly, and as a consequence, fell behind. I think that is a reminder of the importance of a very diverse portfolio of approaches.
What do the combination of mistakes, these realities, increasing returns, a division of labor, the importance of diversification, say about what we should do going forward? I would not presume to speak for others and would not presume to prescribe for the state or other institutions, but let me highlight four implications that seem to me very important for Harvard in its future.
The first, a greater emphasis on science and technology in everything that we do. I have said many, many times that too many academic communities, including mine, sometimes seem like places where if you don’t know the name of five plays by Shakespeare, it is an embarrassment to admit it, but if you don’t know the difference between a gene and a chromosome, you are able to take refuge in the fact that that is a technical subject on which you can rely on others. Whether that has ever been a reasonable way to proceed is something that can be debated. Whether it is a reasonable way to proceed in the 21st century, I think the answer is very clear. This issue of scientific literacy will figure very prominently as we renew our undergraduate curriculum. It also has increasing implications for our professional schools. Whether it is the need for the Law School as it thinks about issues of health law to have people who actually understand the health ethics, to actually understand how cloning works and what cloning means. Whether it is the steps that Dean Clark has taken at the Business School to become more focused on issues relating to health care and issues relating to health science, as well as technology in the training of business students. Whether it is the steps that have been taken at the Medical School to provide for greater integration of those with substantial scientific training and orientation to also become acquainted with questions of management, given the role they are going to play in the broad world.
Second, and I distinguish this from an emphasis on science because I think it is a separate issue, is the recognition of the importance of technology and practice as an independent and important aspect of scientific inquiry and scientific practice. In addition to the issue in the modern liberal arts university of science and the role of science and how universal it is, there’s an expectation of scientific literacy. There is also a tendency to define scientific activity much more by Einstein than by Edison and to focus and venerate theory rather than practical application. If you study — and my study, I hasten to say, is somewhat derivative — the history of science, you are struck by how much of the most fundamental innovation actually derived from attempts to solve quite practical problems. Whether it’s progress in astronomy that was derivative of attempts to solve problems in timekeeping, whether it was progress in mathematics that were attempts to address problems in physics, whether it was progress in genetics that derived from efforts to develop better hybrids, the evidence is overwhelming that the spur of a particular practical problem has been essential for basic science. And beyond that, the evidence is overwhelming that practical and applied science have made enormous contributions.
When Dean Venky and I were discussing these questions yesterday, he reminded me of the fraction of physics Nobel prizes that had been given for the development of particular bits of technology rather than particular bits of theory. One needs only think of one of the classic examples of Harvard’s success, the innovation of nuclear magnetic resonance, as an example of something that has been profoundly important for medical practice, but derived from a rather different source. That is why one of the crucial priorities for the years ahead at Harvard is strengthening the division that Venky leads, the Division of Engineering and Applied Sciences, and putting energy behind the two middle initials there, engineering and applied, as a crucial part of the University’s mission. It is why we remain committed to our close collaborations with MIT through the HST program that spans a wide spectrum of scientific theory and scientific application. It is why the number of people on the faculty here at the Business School who have had substantial engineering training has grown manyfold over the last decade.
The third commitment that we make and the third priority we will have going forward is to taking an open and encouraging approach to collaborations of all kinds. One of my top priorities as President, as was one of Neil Rudenstine’s top priorities, was encouraging collaborations within and across different parts of our University. We have a strong case for every tub on its own bottom, but there are also enormous opportunities to come from cutting across different parts of the University. Equally, we have an enormous amount, I believe, to contribute and, I know, to gain from collaborations with other institutions in the City of Boston. That’s why I was so excited to be able to join Chuck in announcing the formation of the Broad Institute, which benefiting enormously by Eli Broad’s generous philanthropy will, I believe, make it possible to — without establishing any kind of universal template — will make it possible for this community to come together and do things that would have been very difficult at the individual investigator level, and I believe will not just add but will multiply the power of the founding institutions and greatly strengthen this community, and I believe over the longer term, the local economy.
Finally, fourth, I believe we need to have a culture of strong support for interaction and collaboration with the private sector. This is not an area for which Harvard has been most prominently recognized in the recent past. And I am not and will not support anything that changes our fundamental principles. Scientific directions of academic investigators must be set on academic grounds. Our objective is to distribute our research more widely, not ever to be paid to bottle it up and keep it secret. Conflicts of interest are very real issues even if you are a non-profit institution, and must be guarded against. All of that said, I am convinced that if we are to be successful in maximizing our opportunity to advance basic science, if we are to be successful in assuring that the scientific advances that take place within our laboratories have maximum impact, both on the work of other scientists and ultimately meeting the mission that Joe Martin has set for the Harvard Medical School of reducing human suffering, that we must be prepared to work cooperatively with the private sector. We must recognize that — and this is why these issues are not easy — that conflict of interest is one side of the coin, and synergy is the other side of the coin. We must find our way through these dilemmas with more alacrity than we have in the past.
I am struck in this area that there is a natural organizational proclivity to caution. If a partnership is entered into and something goes wrong, there is enormous concern about the mistake that led to that error. Administrators, in the worst cases, can find their careers destroyed or at least their lives put on hold for a year to deal with the consequences of an arrangement that has gone wrong. And that’s why great caution is appropriate. But what is different, and what we must remember, is that if a partnership is not entered into and an opportunity is lost for substantial scientific progress, for saving lives, no one notices that that partnership was not entered into and there is no awareness of the costs of that error. And therefore, it is inevitable that there is a bias towards conservatism and caution. Some of that is very healthy, but some of it requires very careful consideration. That is why, with Provost Hyman’s leadership, we will be reviewing our policies in the intellectual property area, in the technology licensing area, over the next year, and we will look forward to getting the advice of many of you in that process.
This is an area that has enormous potential. I am convinced that, as strong as Mike will show you the life science cluster is today without combined efforts, it can be far stronger five years from now and still stronger a decade from now. And with all of our cooperation, Harvard is certainly prepared to do its part. I believe we can do a great deal for science, for humanity, and for the economy of this area. Thank you very much.