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Dr. Patrick Gallagher
Thank you. Good morning everybody. This will be the first time I've used sock puppets.
It's great to be here. This is the marquee event for all science and technology wonks. It's good to see the wonk group here today—power breakfast.
It's obviously a very interesting time. I'm sure many of you were fascinated with yesterday's developments alone.
I thought what I would do, in the spirit of a breakfast, is step back a little bit and share a little bit of my thoughts about the innovation agenda because it touches NIST in a very direct way, and then use that to talk a little bit about some of the things that are happening at NIST and hopefully, in the spirit of a breakfast, stimulate your thinking as you head into the rest of your day today with the plenary speakers and so forth.
It is an interesting time. In many respects, this reminds me of the period in the 1980s when the United States was coming out of a recession. At that time, sort of the first strong evidence of the impact of globalization was happening. It was really hitting U.S. manufacturers if you recall, at that time. The words at that time were "stagflation," we had anemic economic growth, there were a lot of concerns about job loss, particularly in the manufacturing sector. We were watching the ascendancy of particularly in Asia, Japan in particular, with their manufacturing base. Many of the policy solutions that were being discussed at that time should sound familiar. We were talking a lot about technology transfer. We were talking about technology and advanced manufacturing. We were talking about quality and how to improve quality management in companies.
Today, of course, we are coming out of a brutal global recession. It has cost Americans on the order of eight million jobs over this period. It also feels structural. I'm not an economist, but the disruption that has occurred has been more than you would see just from a business cycle.
We are concerned about globalization. Now, in this case, it is not the kind of debate, should we be in a global environment or not—I think everyone accepts that. But there is deep concern about the repercussions of operating in a global environment, and you see this in the financial markets and exploring the ways that we're tied together.
And now what is happening in the United States is that we have a lot of concern, it's not so much focused on our manufacturing base in this case, but about our ability to innovate. We're now seeing, in fact, innovation as a global phenomenon.
Interesting information: of the world's thousand top R&D performers—private sector companies—90 percent of those companies have facilities or programs outside of their headquartered country. Of the 80 American firms that are at the top of the list, the top of the American list in that group, they spend more than half of their R&D funding outside the United States.
So, our innovation is global. The U.S. now accounts for less than 30 percent of the world's patents. So, it's likely that the next big idea is not going to be one of ours.
And so, the notion again, just as in the '80s the idea that of "Made in America" was breaking down, really the idea here that we're going to create the IP and own the intellectual property and manage from a distance, that's also breaking down.
So the question really is how do we deal with that. And, of course, at the same time—and it's no accident—the discussion has all started to focus around this concept of innovation.
Of course, innovation means a lot of things to different people, but I'm going to use it in the context of innovation as a policy, as a centering idea for policy development.
And, of course, what innovation policy does is it links our economic growth—the premise is that our economic growth is based on our ability as a country to develop new products and services. In fact, there is good reason to believe that is the case.
There is a recent census report that looked back and showed that since World War II, about 75 percent of the growth of the GDP can be related to technology innovation. And, of course, it is important to this audience because one of the foundations for innovation is our science and engineering capability. Our research infrastructure is at the heart of this innovation engine.
From a policy perspective, this is very profound because what it's doing is it's making an economic justification for our deep public sector investments in science and technology. And of course we all know that, and we talk about that in COMPETES, we talk about that in the President's Strategy for American Innovation, we saw it in the previous administration with the American Competitiveness Initiative. This is, and has been, a very strong and bipartisan consensus. I hope that yesterday doesn't signal a change in that. I believe that was a bump and not a permanent change in direction, by the way.
So I think that as a basis, as a policy foundation, innovation is becoming very well established. As I said, it is basically an economic argument, it is a premise. I think it is well-grounded in information, but as a policy to base implementation on, it's still very immature.
What I mean by that is, we know many of the major ingredients in innovation. We know that it has to do with our R&D intensity and how active we are in research and development. We know that it has to do with our trade promotion. We know that it has with our ability to commercialize ideas coming out of the labs, and it is still about tech transfer. We know that it has to do with cost and tax structure and regulation structure. We know that it has to do with all sorts of things.
We also have clarity of the two end points of innovation. What I mean by that is if you look at basic research activities, it is essentially funded by the public sector. Then, of course, at the other end, the commercial activity is done by the private sector. So, at the two end points we have a lot of clarity on who is doing it. In the middle, it's characterized really by the mixing. It is turbulent, there is a lot of activity here and this is, of course, where we want to be able to, from a policy perspective, reach in and optimize. I would say at that point it becomes clear that this is still immature. We don't know the wiring diagram very well at all. I think that is going to be a major goal.
I will say from my perspective that, while we don't know what the answer is, I think we can characterize what the answer looks like. I believe that it's characterized by this diversity of participation—going from private sector activity, but public sector funded, and what happens in the middle means that it is a result of the mix of the creativity that is happening because of this mix of laboratory and industry, this mix of business and science, that this is where the magic happens in the cycle.
I think, therefore, that the answer is going to have a lot to do with partnerships—both public-private partnerships, but also I want to emphasize public-public partnerships. What do I mean by that? The states.
The states play an enormous role in our ability to innovate. It goes back to this question about a federal industrial policy. We don't have one. In fact, it's interesting that sort of question has really been tied with NIST since it's founding. I believe its founding in 1901 was actually held up over questions about whether this was an appropriate federal role, to establish a national measurement infrastructure.
But that's really a question about the federal government because we believe in this country the federal government should really be really be about a level playing field. Of course, the issues come up in innovation policy because in the end, you are talking about one sector or certain companies and we don't want to pick winners or losers. You have all heard this before.
The states don't have that problem. In fact, the whole idea of regional clusters and regional innovation is based around the idea of selecting areas where you have special attributes. I think rather than have this "should we or shouldn't we" discussion, I believe that the whole issue kind of goes away when you are talking about how does the federal government support the states and their efforts and that's when these public-public partnerships become important as well. So I think that is going to be a key thing.
I think the other one is that innovation is complex and we should not oversimplify it. I think this is about a chain of performance and it is not about a magic bullet. I think from a government management perspective what that means is we have to get more sophisticated, and it means we really have to have a portfolio-managed approach. What we don't want to have is a flavor-of-the-month approach. It's like watching kids play soccer and everyone is running in mob-ball, everybody runs to the ball. We always run the risk of doing that but, in fact, if we all start focusing on one new thing, and we forget about the basic research activities, and we forget about the trade promotion, forget about all these other ingredients that are just as crucial, we'll just move where the weak spot is.
I also think that we have to be able to manage innovation and that means basically being able to measure. We don't really have good metrics. This is an economic policy position. We don't really understand the economic models behind this and what are the appropriate ways of measuring and looking at innovation performance. Until we do that, we are going to be in a data-poor environment, and I don't know how we begin to sort it out as policymakers to start optimizing it.
It also means we have to be comfortable as scientists mixing discussions of science and technology with discussions of economics and business. If you have an economic premise for technology in the role of science and technology in this economic model, we have to be comfortable mixing those and sometimes we are not.
My last comment on what the answer will look like is it's a long-term answer. This is a process and not a moment. This is about putting in place things where we are in for the long haul and we know that. The time to develop ideas from our ingenuity in our labs to the market is long, and if we lose our focus, then I think we lose our ability to really reap the full benefit out of this effort.
I think the innovation policy has been really foundational and instrumental, and it really is changing the way we work within the federal government, and it changes the way I want to manage NIST. It provides a framework, and the President has really been very clear on this. He's been outspoken about the fact that our long-term economic prosperity is going to be built on our ability as a country to do science and engineering. He believes that very deeply. He has not only communicated that, but he has put together a policy framework, the Strategy for American Innovation, that was released last September. He backed that up with very strong commitment in terms of his budget request, the priorities of Recovery Act, look at the focus on education.
And, of course this Framework for American Innovation for me is a very interesting framework because it did do what you would expect. It listed all these key ingredients. If you haven't looked at it, it is really worth looking at on the White House Web site, but this innovation triangle, where you have the foundation built on the building blocks, which have to do with our human building blocks—workforce and education and training, it has to do with our physical infrastructure in terms of the internet and broadband deployment, it has to do with things that we need—the research tools, the technological capital, lays really this groundwork.
What it does in my view that goes beyond what I've seen before is that it goes into the business cycle. It looks at the markets, and it looks at trade promotion. It's beginning to look at standards now. It's beginning to look at the things that set conditions for innovation and for companies to thrive.
And then most importantly, for the federal sector, it identifies when we get involved in focus, and this is very interesting because technology innovation is not just critical to economic growth, but it is also foundational to how the government itself works.
What you see in this innovation framework is a focus of applying innovation to addressing critical national needs. How will we address our energy needs in this country? How will we lower the cost and improve the quality of health care? How will we help to protect and defend our country?
So these goals, these government goals, these public goals become part of this innovation framework. That is very important because it ties the mission focus of the agencies right into this.
And so as a manager of a federal agency now, this becomes a very rich document because it not only lays out the priorities, and at NIST we are very grateful for the fact that NIST is a high priority and our funding is scheduled to double, but it also lays out a framework where I can work with other agencies because it defines some of these ingredients. And it defines the focus that we are going to have as we work across other agencies. I'll touch on that when I come back and explore some of the thoughts for NIST.
I also wanted to make a quick comment on manufacturing. I commented on this comparison between what was happening in the 1980s and today. I think manufacturing could risk being forgotten here a little bit, but I think it's just as critical. The reason I say that is several-fold.
One, manufacturing is one of the early bright spots in our recovery. We are starting to see some real economic activity coming out of our manufacturing sector. It is very important. We know that the job part of this recession really focused our attention on this.
From a purely economic perspective, it may be the case that a manufacturing sector is no different than any other sector of the economy, but my belief is that from an innovation perspective, that is absolutely not true.
Seventy percent of the private-sector R&D spending is done by manufacturing firms, and private-sector spending in R&D is much larger than the federal sector. That is where the rubber is hitting the road, and that is really been where the action has been, so from an innovation perspective, if we lose advanced manufacturing, we have really cut one of the key legs of our whole enterprise away from us. There is a deep interplay between using something and innovating something. It doesn't mean that all manufacturing industries have to co-locate. We know that these things can work fairly globally, but if we lose it all, I believe that we have really lost something essential.
So manufacturing to me, from an innovation perspective, is very critical. That is why I am concerned when we see advanced technologies—the reason manufacturing is leaving the shores of this country is no longer labor. It's simply not the case that we are not siting industry here because of labor costs. What you see today is it's just as likely to set up high-tech, highly automated advanced manufacturing production in other countries where the labor cost difference is really not an issue. Where the energy cost difference is not an issue. Where in fact it's a capital-intensive industry, and the difference is more subtle. It may have to do with the fact that the ecosystem for industry is simply now better somewhere else. The supply chains and the infrastructure and the processing is simply much more available, and I think we have to pay attention to that.
It has been somewhat striking as we have focused on advanced energy technologies in this country. Take advanced solar. The photovoltaic industry is largely offshore now, even though that technology was really a product of American laboratory work. We have to understand what makes these decisions and pay attention to this climate that we have for basic industry and manufacturing in this country.
Let me talk a little bit about NIST. NIST and industry have been linked for almost 110 years. We were founded in 1901 as the National Bureau of Standards—we were the nation's first physical measurement laboratory. Our mission then is the same as the mission we have now—there has been no mission creep at NIST—it's been to promote commerce through measurements and standards. We're the nation's measurement laboratory.
That is interesting to me because this is an agency that was being founded at sort of the peak of the industrial revolution when the idea of measurement to sort of enable trust in commerce, about how buyers work with their supply chains, about how companies work with their consumers, and the fact that we needed to know that a pound is a pound, and that things would work well together.
What's really happened is not the mission of NIST, it's simply the technology over which measurements are occurring has become very rich. And so the way we carry out that mission has become complex.
The other thing I find very interesting is that when NIST was really being founded—this was coming out of the time when the treaty of the meter had been signed a decade or so before the National Bureau of Standards was stood up—and the idea really initially was that a national measurement system would be an artifact system. You would have this standard meter sitting in a vault and you would make copies and you would send it around and that was what it looked like in the 1800s.
It was immediately clear than an agency of this type was going to be a science-based agency, that measurements, in fact, were advancing just as technology was advancing, and the only way you could have a national measurement system was to be at the forefront of science.
And that deep tie between science and measurement has remained with us to this day. The central role we have, for example, as the nation's timekeeper. And then you look at the absolutely world-class work in atomic, molecular, and optical physics that exists at NIST—it's one of the leading Meccas for that type of work—and those two are related because that science is at the heart of clock science. So that is as true today as it was then.
So, in my view, the mission of NIST is becoming—this measurement mission—is becoming very important.
One thing happened in the 80s though; we talked about this period of time. The mission of the National Bureau of Standards was changed in the mid-1980s. And, of course, it was directly borne out of this experience we were having with manufacturing competitiveness. And what happened at the time was we changed our name. Some people still believe that was one of the worst name changes because I can still talk to young folks and say "Well, I work at NIST," and they look at me. "It used to be called the National Bureau of Standards;" "Oh, I remember that." So we have still a recognition problem.
But the name change, what actually happened was three new programs were added to the agency: the Baldrige National Quality Program, the Advanced Technology Program [ATP], and the Manufacturing Extension Partnership Program [MEP].
This is interesting because these are really innovation programs. These are programs sitting in this span from research activities in the labs all the way out to manufacturing. And that remains true today.
In my opinion, only one of those three new programs failed. You might be thinking ATP, because ATP was eliminated in 2007. I would actually argue that is not the case. ATP was eliminated in 2007 and replaced with the Technology Innovation Program, which is different. There are some key differences in how that program was structured, but as a program, it was very successful. In fact, the way ATP was put together is still heavily modeled for other programs. It really had to do more with political considerations than the role of a program like that.
The program that failed was actually MEP, and it is a good thing it did. MEP was stood up to take the high technology in the NIST labs and transfer it to small- and mid-sized manufacturers. They weren't ready for it, and the program was wise enough to know, within the first or second year, that instead of just continuing to ram that technology into a manufacturing sector that wasn't ready, they started to listen to what the small- and mid-sized manufacturers needed, and then provided those services. The services that were provided through MEP quickly became about quality and about lean manufacturing and about promoting the kinds of things that they needed to survive. I think that has been the heart of its success. So in some ways it was a design failure, but a programmatic success.
Let me give you a couple thoughts on why NIST finds itself I think at one of its most critical points in time. And it's not because we have been shifting our mission at all. As I said, I think it is because we find ourselves at a time when the mission's never been so important.
This week, in Denver, Colorado, we hosted the first of a series of workshops on grand challenges in measurements, and we pulled together a group of 70 or 80 world leaders in advanced photovoltaic technologies to meet and basically look at where these set of technologies was going. And there are a lot of issues in terms of getting that field really healthy, in terms of lowering the cost of photovoltaic technology—making it competitive, restoring a strong manufacturing base in this country. It has a lot to do with the markets that are created.
But one of the things that came out of this workshop was that measurements remain one of the key barriers to their progress. It is still true today that we cannot measure the solar conversion efficiency for some of these technologies to anything better than 10 percent, which is not acceptable.
We don't understand the measurements that are happening in these—these are basically applied nanomaterials, these new photovoltaic materials. We don't understand how to do measurements, nondestructive measurement, to see what is happening at these interfaces where all of the activity in conversion is happening.
We don't have the data to support materials by design, which is driving some of the organic photovoltaics. The ability to really design and optimize these materials. And in particular we really don't have the measurement or standards infrastructure to support photovoltaics in buildings and to characterize how sustainable they are, their reliability and their safety.
So here is a brand new technology that I think is foundational to innovation and has all of the ingredients of the President's framework and the NIST role is clearly called out.
Another area that is receiving a lot of attention at NIST is standards. And again, this is an area where we've been involved for a long time. I'll confess sometimes it's been sort of a sleepy backwater area, even at NIST. But standards are becoming a big deal, and probably the best evidence of that is last month we stood up a national science and technology subcommittee on standards, which is basically an interagency committee at the head-of-agency level to improve coordination across federal agencies on their use of standards.
Why would we do that and why is this suddenly becoming a big deal? I think there is a couple reasons. One is the role of technology in addressing government problems is becoming central. One of the examples is our energy.
We want to promote renewable energy use in the United States, and to do that we needed an infrastructure that would allow widespread renewables to be installed, and the existing electrical grid could not do that, and so you saw as soon as the President came in, this focus on Smart Grid technology.
Steve Chu, the Secretary of Energy, called me within a week I think of being in office, and I thought he was just going to talk about sharing the Nobel Prize with Bill Phillips at NIST. After quickly mentioning that, he was really after when was I going to get the Smart Grid standards done. And so NIST was charged by law with developing a framework—an interoperability framework—to these set of technologies that allow us to move power on and off the grid, that allow us to have smart appliances that can give consumers the information they need to modify their use behavior, so we don't have to build power plants to address peak use, which is what we do today.
And so, if you go down the list of issues that we are tackling: in energy you have Smart Grid, in efficient government we're looking at cloud computing; we're looking at cyber security; health information technology; resilient buildings. These are all standards-driven issues.
And standards are developed in this country by the private sector. We look to industry for the leadership to develop standards. And so what we are really focused on is how do we work as a federal government to get our act together so we can engage industry early and strategically to make sure those standards frameworks are in place.
So NIST finds itself in the middle of really a remarkable time. Without having flexed our mission at all we find ourselves right in the middle of the President's innovation framework.
One of the things that has resulted in for me is making sure that we can step up to the plate. NIST has to deliver. I think NIST has a remarkable foundation and technical expertise for getting it right, for its integrity. And yet we are also now in the middle of very high profile, very visible, and very urgent tasks.
That is one of the reasons I proposed a reorganization. It wasn't to change where NIST was or where it was going. It was simply to focus the agency on the performance of its mission. It was to provide leadership of our major program elements, so the reorganization establishes the position of associate director, one for our laboratory programs, one for the innovation industry programs. And then in the laboratories it was to make sure that the laboratories were focused not just on the research part of the program but also on the delivery of those research products into measurement services and data products and the things that industry needs from us. So that is well underway.
I thought what I would do in closing is to leave you with some sort of provocative thought that maybe will help you make the day less long as you go through the day.
So, here are some random thoughts going forward.
Don't forget manufacturing. I think it is going to be an enormous driver, not just for NIST. I think that you are going to see it crop up in science and technology policy. It is simply too embedded in the innovation cycle to forget.
What's missing in manufacturing is frankly we do not have a policy framework for engaging on advanced manufacturing. We have not defined clearly how the different agencies participate. There are very big questions about the role of federal programs in manufacturing. We are getting into the same questions that boundary. Manufacturing occurs at the public-private boundary.
And the other reason I think it is important is we have seen huge shifts in funding and participation over the past 20 years. One of the real striking things when you look at the U.S. today is that if you look at advanced manufacturing technologies, the process technologies, 20 years ago those were largely funded by industry because industry had large R&D organizations that could support that. They are not there anymore, and the federal agencies have not picked it up. So one of the questions is "How are we going to provide that?" That's actually where many other countries direct their subsidies—at the tooling and process support, so that's something we need to pay attention to.
Commercialization and technology transfer will become very important drivers. We've already seen that. There has been a lot of discussion, including from the Commerce Department, on this.
My view is that before we start fixing things, we should define the problem. I think the starting point for this is metrics. What is an efficient amount of commercialization from basic R&D? Some people say it's not efficient enough and some people say no, it's as efficient as anything in the world. I think we need to actually talk about that and look at the role that universities have, the role that our national labs have. I think this is going to be an ongoing policy area.
Also I think that generic technology platforms and technology infrastructure are key enablers for innovation, and they may provide the touch point that we need to work together on these problems.
And my last one is that the list of government drivers that are at the top of the President's pyramid is long, and I don't see any sign of it getting shorter, and they are all urgent. Safety and security and privacy. Economic growth, energy, environment, and health care.
So, we have a lot to do. Let me end and thank you for having the chance to talk to you this morning.