Entrepreneurial State and Apple

In her book on the Entrepreneurial State, Mariana Mazzucato says that even Apple, the company we associate with creativity (at least while Steve Jobs was in charge) didn’t really come up with new technologies. Rather, as Steve Jobs himself said about creativity:

“Creativity is just connecting things… (Creative people) were able to connect experiences they’ve had and synthesize new things.”

 

Mazzucato says the iPhone is the perfect example of “just connecting things”, each of which was created by the State, not the private sector. These include semiconductor devices, ranging from the CPU to dynamic RAM (DRAM) to hard-disk drives (HDD). LCD’s (Liquid Crystal Display) too originated from government funded labs. So too did those tiny enough to fit in a phone Lithium-ion batteries. The entire field of DSP (Digital Signal Processing) was based on advancements to the Fast Fourier Transform (FFT). Then there’s the Internet itself which was created by the US military. HTTP and HTML arose at CERN, a European government funded agency. And last of all, there’s GPS:

“Civilian use of GPS quickly outnumbered military utilization following the release of GPS for public applications in the mid-1990’s. Yet, even today, the US Air Force has been at the forefront of developing and maintaining the system.”

The connecting-the-dots (technologies) part aside, Apple has done a phenonemal job of coordination logistically:

“Apple’s success did not hinge on its ability to create novel technologies: it hinged on its designing, operational and organizational capabilities in integrating, marketing and selling those low-hanging technologies.”

 

To clarify: she isn’t belittling Jobs or Apple. Rather, her point is that State doesn’t get the credit (or reward) for most of the underlieing technologies behind the iPhone. Which leads to the next question of relevance increasingly:

“How can we ensure that the innovation ecosystem is one that results in symbiotic relationship between the public and private sectors rather than a parasitic one?”

If the State poured money, and took the time and risk to invent most of the technologies, why should all the profits go to private sector companies? What do the State and the tax-payer get in return, a question asked with increasing anger in the era of globalization, where companies keep their profits in low-tax havens?

 

All of this is kind of ironical, isn’t it? The US is the torchbearer for capitalism and dislikes Big Government more than almost any other Western country. And yet, Mazzucato is saying that most high risk, long gestation time, totally new technologies come from the State, not the private sector! Which is probably why she says:

“If the rest of the world wants to emulate the US model they should do as the United States actually did, not as it says it did: more State not less.”