Episode 13 The Science Behind Becoming an Entrepreneur – Podcast Transcript
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Episode Transcript
[00:00] Matt Clancy: There’s a lot of evidence that being around entrepreneurs makes it more likely that you start a business. There’s not much evidence that being around other entrepreneurs makes you more likely to start a successful business.
[00:22] Elijah Eilert: Today, after pleasure of welcoming Matt clancy on the show show, matt is an economist specializing in science and innovation. For the last two years, he has been writing a popular living literature review on these topics. You can access this incredible resource at the website and newsletter, New Things Under the Sun. Matt is currently a Research Fellow at Open Philanthropy, where he works on this and related projects. He’s also a senior fellow at the Institute for Progress and formerly an assistant teaching professor of economics at the Iowa State University. Welcome to the show, Matt.
[01:02] Matt Clancy: Thanks for having me.
[01:03] Elijah Eilert: So today’s design is a little bit different. We want to use matt’s website and his articles as a guideline for the show today. So we will be grabbing some interesting articles. Matt will sum them up for us and then I’ll be asking some questions and relate them more to corporate innovation and innovation management in general and things we can learn and adopt from these insights.
[01:35] Matt Clancy: Sounds great.
[01:37] Elijah Eilert: So one interesting article is the idea of being an entrepreneur. We’ll be linking all the articles in the show notes the Idea of Being an entrepreneur. Can you tell us a bit about this article?
[01:49] Matt Clancy: Sure. So this article and another article I think called Entrepreneurship Is Contagious are kind of a pair. And what they’re trying to sort of jointly discuss is where does the sort of motivation and drive to become an entrepreneur come from? Obviously it can come from lots of different places, but this focuses on kind of the notion that the idea that you can be an entrepreneur is not something that you might normally consider. People just there are a million options for what you can do with your life. And most people don’t actually run through the list of a million different options and then pick the one they think is best. Instead, people kind of consider a more circumstruct one of the options in that set might be, I should start my own business, I should be an entrepreneur. And how does that what differentiates people who sort of consider that from people who don’t? And the two pieces kind of try to argue being around people like you who are entrepreneurs kind of plants implants that idea. So I’m an economist and we’re used to sort of thinking of people as just being kind of rational and weighing costs and benefits. And so these articles were sort of taking a different tack and say before you can even get to that stage where you’re weighing the costs and benefits, you kind of have to be thinking about this option. It can’t be unthinkable for you in the sense that you don’t even think of it. And so there’s kind of five different arguments that the two articles jointly cover and they look at a lot of different academic literature to make that point. So the first argument is just this observation that entrepreneurs tend to be found in these sort of social clusters. So if you are an academic scientist, there’s a paper Marks and Hugh and you’ve discovered something new, and some other group of scientists have discovered roughly the same idea. They have this clever way of identifying when two scientist groups make similar ideas around the same time and then that lets them compare. One group decides to commercialize the idea, one group doesn’t. And what are some of the differences between these two scientists? Because the idea is pretty similar, they’re both hopefully equally amenable to being commercialized. So what’s the difference between these two groups? And it turns out one of the differences that matters is if the scientist who commercializes the idea has previously worked with entrepreneurs, actually serial entrepreneurs. So it’s not that they themselves have a history of entrepreneurship, but they’ve been around people who’ve done this. That kind of seems like it. So that’s one piece of evidence that these guys come in clusters, but there’s a lot more people have done studies of the workplace. So if you work with more coworkers who have started a business in the past, you’re more likely to go on to start a business yourself. And there are studies from Denmark and the USA that look at that and people have done similar things, looking at sort of the community level. So if you’re in a community with a lot of entrepreneurs, you’re more likely to go on and sort of start a business in the future yourself. So that’s sort of argument one is just these guys are found in clusters together. Now, that could be because they’re transmitting this idea that you can be an entrepreneur to each other. But there’s a lot of other reasons that entrepreneurs might cluster together. They might just choose to work at the same kind of companies because maybe there’s the right kind of entrepreneurial opportunities in this field and they want to get a leg in this field, whatever. So that’s why it’s only one of five arguments. The second argument is some studies that try to look at kind of close to an experimental set up where we randomly put some people with entrepreneurs and put other people who are not otherwise different. We just randomly put some with entrepreneurs and some with don’t, some without entrepreneurs. There’s a study that looked at students in a class project getting mentored, and some of the students were randomly paired with a mentor who was an entrepreneur and some were randomly paired with a student who wasn’t an entrepreneur, but it was just somebody in the same industry. The students who are paired with the entrepreneur two years, they track them after they graduate, and they’re more likely to join a startup. There’s another study that looks at people who are scientists and they have to go do their postdoc, their postdoctoral training. And the paper makes a lot of effort to sort of show that when postdocs are deciding who they want to work with they don’t really think much about if this guy is an entrepreneur. They can read their autobiographies, they can do some statistical tests. People basically want to work with scientists who work on the topics they want to work on who maybe live in the right area, who have a lot of prestige in the field, so on. They don’t necessarily think of is this guy also an entrepreneur? But it turns out if you end up working with a postdoc mentor who has patents, you’re a lot more likely to get patents later in life too. It’s like this idea was implanted. The last study is about Swedish adoptees. Go ahead, let me pose it just there.
[07:12] Elijah Eilert: And patents then translate a measure for innovation.
[07:18] Matt Clancy: Yeah, but from an academic perspective, probably most academics don’t get a patent. The ones who do get a patent are more likely to have a commercial orientation than the ones who don’t. But I totally take your point that we shouldn’t say these two things are synonymous. Another study, though, look, swedish adoptees, if you get adopted by an entrepreneur, you’re more likely to become an entrepreneur and the effect is even stronger than if your biological parent isn’t an entrepreneur. So that’s kind of interesting too. So we’ve got these guys clustering just for myself.
[07:52] Elijah Eilert: Could you say that again?
[07:54] Matt Clancy: Yeah. So there’s the study. They’ve got like 4000 Swedish adoptees and they know who the birth parents are and they know who the adoptive parents are and they look to see if the parents are entrepreneurs. What’s the probability the kids grow up to become entrepreneurs if the kid has got a birth parent who’s an entrepreneur? But they don’t. They don’t. They’re not raised by that parent. They have like a 4% higher chance of becoming an entrepreneur. Or maybe it’s 4% of the time they become entrepreneurs. But if they’re raised by an adoptive parent who’s an entrepreneur it’s like twice as high 8% or something.
[08:32] Elijah Eilert: No way.
[08:33] Matt Clancy: Yeah, it’s interesting. And there’s more too. So the third kind of argument ties back to some of these earlier papers, which is it’s not just being around entrepreneurs, but it seems like this effect is a lot stronger if the entrepreneurs are kind of similar to you in some salient way. So if we go back to that adoption study if you’re a boy, it matters a lot more if your father is an entrepreneur than if your mother if you’re a girl. If your mother is an entrepreneur, you’re more likely to become an entrepreneur yourself. But if your father is an entrepreneur has no effect. Actually, if you look at these studies of coworkers, similar kinds of things where if the coworkers are more similar, the effect is stronger. So they’ve done studies of like I work for a startup. Obviously if I work for a startup, I’m working with an entrepreneur, the person who started the startup. But if that founder is awarded woman and I’m a woman, the effect is a lot stronger that I go on to start my own business. If she’s a mother and I’m a mother, it’s a stronger still effect. If she’s not a mother and I’m not a mother, then that is an effect if we have the same background, if we come from similar regions. So it’s kind of like consistent with this idea that I’m thinking, hey, someone like me could do this. There’s even a study that looked at hedge fund managers who go out and strike out on their own and start their own hedge fund and the kinds of factors associated with them deciding to do that. And one of them is if you’re alumni. So people you went to university with, if they go on, if they’re doing that kind of thing, you’re more likely to do it too. And that’s kind of interesting because you made the decision to go to this university a long time ago. But there are people, you know, they’re in the same social sort of circle. So that’s the third argument is that the similarity of the person seems to matter a lot. The fourth one, well, I think this is really interesting stuff. Fourth argument is if this is really about you kind of having the idea, putting it inside your choice set and then considering it, then it’s kind of a situation where you only really need to hear the idea once, and then after that, it’s not going to matter that much if you hear it again and again and again. So all of these studies, for example, where you pair a student with a mentor who’s an entrepreneur versus not an entrepreneur, or if you’re working with coworkers who are more entrepreneurial, these kinds of studies, one group that these studies don’t work on is the children of entrepreneurs. So if my dad was an entrepreneur, it doesn’t seem to matter if I work with a lot of entrepreneurs. It doesn’t affect my rate of starting my own business. It’s kind of like my interpretation of this result is I was already considering that being around other entrepreneurs didn’t give me any new information about this is the kind of path you could do with your life. Another kind of study that suggests that I think is the famous study of Harvard Business School students. So at Harvard Business School, students get divided up into these study sections and you spend all your time with these students, you take all the classes together, you form a lot of bonds with these people. And these study sections are formed not randomly. Like the Harvard tries to sort of put people in interesting groups that have a bunch of different backgrounds, but they don’t sort people based on entrepreneurship. And the upshot is some people get sorted into a group where their classmates have formed businesses in the past. Maybe 10% of them have previously owned a business, and other students end up in groups where nobody has previously operated their own business. And all the studies I’ve said so far, we would predict that the guys who end up in a study surrounded by classmates who previously ran businesses would be more likely to start businesses. But they don’t actually find that effect in this study. They find that it’s actually the reverse. The people who are in Harvard Business School, if you’re around other former ex entrepreneurs, you’re less likely to start a business. So my interpretation of that is that, well, that’s actually the main result. The learner and malben the authors kind of propose is that they kind of provide some evidence that having these other entrepreneurial students around, it mostly serves to sort of shoot down bad ideas. Like, the people who don’t have these entrepreneurial students around, they found more businesses, but they’re like businesses that are more likely to fail. And the ones who are around lots of ex entrepreneurs, they found less businesses, but the ones that succeed are more likely. The ones that found businesses are more likely to succeed. So my interpretation, though, is if you’re at Harvard Business School, you’ve probably got the idea in the back of your mind, like, maybe I’ll start my own business. You don’t need to be around these other Harvard Business School students. Be like, oh, maybe I could do it too. You don’t really need that boost of confidence. And then so I said there were five arguments. The fifth one is I’ll say just really quick is just you can ask the entrepreneurs what was important in your decision to be an entrepreneur. And a big share of them, I think it was like more than half say having an entrepreneurial role model who is a family member or friend was either somewhat or very important in their decision. And there’s even some studies that have tried to sort of pin that down and see if they’ve looked to show that if you’re around a lot of entrepreneurial coworkers, you’re more likely to found a business than people who weren’t, and you’re more likely to report role models were important. So those are my five arguments for kind of the case that, you know, we pick up what we think are options for your life from the options we see other people embracing. And entrepreneurship is not really any different, and it’s not sort of a default thing. But if you’re around people who do it, then, yeah, you might consider it.
[14:55] Elijah Eilert: I’m trying to relate the findings to either large organizations or ecosystem buildings. What does this mean for policy? Decision making for states or countries, I think is something we could yeah.
[15:15] Matt Clancy: So I think at the level of a state or a country, this is getting more speculative. So everything I said before, I’ve got like five or six studies, but the implications all speculate a little bit. And I don’t think they’re like crazy speculations, but I think one of them is that these regional clusters where you have lots of entrepreneurs, this is one reason why Silicon Valley is Silicon Valley, right? It’s in the air. It’s sort of in the city’s culture. People are around lots of people who founded businesses, and so people expect that’s what you’re going to do. And if you’re in that sense, having lots of entrepreneurs can sort of be this sort of self propelling cycle, right, where once you have enough, they kind of carry that culture forward and you don’t need to do as much work to foster it as a place that maybe doesn’t have that kind of group of entrepreneurs to begin with. So that’s one thing. Another is like at the level of an organization. A lot of times people talk about, do we have a culture of innovating in this firm? And I think this is kind of getting at a similar idea. Do you see your coworkers innovating trying new things? And I mean, entrepreneurship and innovation are not exactly the same, but they’re like close cousins. They’re both kind of recognizing that the given set of options to solve a problem is maybe not good enough and you’re going to try and create something new that’s sort of outside the package. So I’m not happy with the quality of my business options, instead I’m going to start my own or I’m not happy with the quality of the solutions to some problem. Some people look at the options and they pick which they think is the best one. Other people have the insight that they sort of think beyond that and say, I’m not happy with any of these and there’s a better way to do it. And I think that that’s kind of an idea that’s not a default, and being around people who do that can kind of bring it into your option set.
[17:31] Elijah Eilert: Yeah. And if that doesn’t happen, we know that people with an entrepreneurial drive leave companies if they can’t fulfill that desire to make things better, as you write in the article. And if that doesn’t get fostered, we see organizations lose good people.
[17:54] Matt Clancy: Yeah, I could see that this is arguing kind of the entrepreneurial types, they’ve been entrepreneur pilled or something, so they can see problems that other people kind of just accept as like, that’s just the way life is and you make the best of it. And other people say, like, I don’t want to just make the best of it. I want to try to solve that problem. And so maybe it’s hard to maybe it is harder to retain people like that if you don’t give them the space to try to solve those problems and you just have to accept it.
[18:26] Elijah Eilert: I would like to try and talk more about what this can mean for policy making for politicians and departments. And I should take a step, take a step back and maybe help me to understand two things. I might put two things out there and see. And I’ve got one question. The reason why we even want all this entrepreneurial activity in the first place from a political perspective is usually assumed economic gain like standard of living for society as a whole. The individual there doesn’t really matter. Talking about unsubstantiated claims, that’s me right.
[19:22] Matt Clancy: Now you could say this is we try to promote entrepreneurship because we think it’s sort of good for the community, not necessarily because we think it’s good for the entrepreneur.
[19:31] Elijah Eilert: Right? That’s what I’m claiming. You say entrepreneurship is contagious. I say it can be addictive. So one could go very far now and by fostering entrepreneurship it can be quite harmful to certain individuals now. But on the other hand, obviously I’m thinking a lot about how can we foster innovation ecosystems and I spend a lot of time thinking about it and doing it. So I’m not against it. And that’s maybe where my question lies before continuing with this. So the Harvard group that was more likely to be actually successful, I think that might be the lesson. Like we don’t want necessarily everybody to have a goal. I think for some people it’s emotionally actually quite difficult and they don’t have to I think not everybody has to write or doesn’t everybody has to have the psychological makeup also of going through this and dealing with all that uncertainty. The same for corporates. Not everybody I think, has to innovate and has to go through this. For some people it is just emotionally actually quite hard. So I would love to see how we can get to something here that makes sense putting this out. How can we come up with smart policies that don’t necessarily wanting everybody to be an entrepreneur? How do we have those groups and foster those clusters that at the end are also successful in the output or more likely to be successful right. And therefore most likely better for the individuals? Sorry, that was a long no.
[21:38] Matt Clancy: I mean, one finding from these studies that I didn’t emphasize because it’s not directly related to my argument, but it’s quite related to yours, is an alternative theory is being around entrepreneurs teaches me entrepreneur skills. So I was always considering it, but I kind of was mentored by entrepreneurs about how to be a good entrepreneur and that made the benefits tick up above the costs. So that’s an alternative story and a lot of papers have looked at that and they find very little evidence of that. There’s a lot of evidence that being around entrepreneurs makes it more likely that you start a business. There’s not much evidence that being around other entrepreneurs makes you more likely to start a successful business. So it’s kind of in some evidence. It’s not very strong. Like, it’s it’s hard to do good statistics on this because, you know, if I have a group of 1000 people and 4% of them decide to be an entrepreneur, well, that’s 40 people. Now, if I want to see which of them are good entrepreneurs but which are less good, instead of having a sample of 1000 and trying to pick out 40, I now I have a sample of 40 and I’m trying to look within that. So it’s hard to do this statistically, but the evidence they have in the studies finds kind of the opposite result is not uncommon to find that the kind of people who are sort of pulled into entrepreneurship by being around peers who are entrepreneurs are often less successful entrepreneurs. So that speaks to what you’re saying, that if you think of entrepreneurship as contagious and maybe we think the social benefits are high enough that we want to encourage this, but we need to recognize that maybe it’s bad. For individuals. And maybe there are policies to support the kind of people who are doing something that we think is good for society but risky for their own personal well being. I don’t know what that is, like social safety nets, but if it’s emotional and psychological, maybe it’s building a community of people who’ve been through similar things. But we’re talking about speculation here too.
[23:47] Elijah Eilert: Yeah, I’d love to speculate a little bit, I guess. Yeah.
[23:51] Matt Clancy: That’s kind of a podcast, right?
[23:54] Elijah Eilert: Yeah. So that’s very interesting. Did you say there that there was basically no skill transfer? Or maybe did you say that we didn’t find a lot of the assumed skill transfer by entrepreneurs just hanging out together? Is that right?
[24:19] Matt Clancy: I mean, the kinds of studies that I’ve talked to which are not necessarily explicitly designed to be studying, how well can you teach entrepreneurial skills? They’re like, did I have coworkers who were entrepreneurs? Did I have a founder who was like me? So possibly they’re being inspired, but they’re not being mentored. But it could be that we just don’t know. We just don’t observe what’s happening. But in these cases, it’s consistent with the idea that there are some people who think they’ll be really good at entrepreneurship and they decide to go into it. There’s other people who are never thinking about it. Maybe it’s not a good fit for them. They haven’t thought much about it. They see people like them doing it, they get pulled in, but they’re kind of newbies. They haven’t given a lot of thought. It wasn’t something that they were so obviously good at that they had already considered it. And the evidence is at least consistent with that kind of story that they don’t have outcomes that are as good as people who were always going to be entrepreneurs no matter what the rest of the world.
[25:28] Elijah Eilert: So it might be unreasonable as a goal, let’s say, for a city to reach beyond that part of the population that, as you say, was always going to be or had whatever characteristics to start a business anyway. Is that would that be like if we could come up with this number? Right, let’s say 2.35% of the population is a reasonable target. I don’t know how we could, but.
[25:56] Matt Clancy: Then it’s a thing to consider. But the way I would sort of think about it is I’m just making numbers up here, but suppose like you said, there’s some 5% of the city that’s like core entrepreneurial. They just want to be their own boss, whatever you think is important and they’re always going to do it and maybe they succeed. What do you think? Like 20% of the time? Who knows what? Then there’s the people that will be great. I know. Then there’s the group of people who only would do it if they had sort of inspiration. If they have a friend who’s an entrepreneur, maybe they only succeed like 10% of the time so they’re half as effective. That becomes a question of does the policy maker think that that’s a good drawing that person in is better than just not having an entrepreneur? Right. And the more entrepreneurs we have, the more kind of self propelling they are. And it’s the kind of thing where maybe we think we want to. Even though most people will fail, the really big successes are sort of big enough that they justify all the failures. As long as you have good policies to sort of take care of those people who are sort of taking the shot for all the rest of us and have an unlikely shot at succeeding, maybe.
[27:13] Elijah Eilert: Let me see if this makes sense. Not that I’ve got data on that, but is the assumption reasonable or not? So we could say as a policy maker, we could say, okay, we want more because if we have more, it will spit out some of those were successful. It’s pretty simple. Or do we want less, ie. Filter better if we can, and then put more resources into supporting them? I guess those are the two things you can really work with, right?
[27:46] Matt Clancy: That’s right. So you can talk about talent selection basically, right. And I don’t know that much about how well they are at talent or idea selection for sort of entrepreneurship, innovation. I think that’s a very active thing that people are thinking a lot about is like how can we spot good ideas? How can we spot talented people early and give them resources? To the extent you think that’s possible, then yeah, that’s way better than just sort of targeting everybody and having a lot of if you only have a finite number of resources, of course you should try to give it to the people you think are most likely to succeed. That policy depends on you being able to do a pretty good job of picking or at least a better than random chance of picking these people. And I don’t know, I don’t know how well people work on. I mean, that’s what vc is trying to do, right?
[28:49] Elijah Eilert: Yeah, that’s what we do. No doubt, like trying to quantify better the most likely chance of success and so on. But yeah, I find it a lot more complicated. It is arguably a lot more complicated from a state policy perspective, like a country policy perspective. Fostering entrepreneurship is not easy. Putting resources somewhere is not easy, it’s just not right. Like in Australia, I just recorded a podcast with somebody, with a journalist here from Innovation oz on the Innovation Metrics Review. So looking at the way Australia measures innovation and are these indicators accurate and should we change them and so on. The study was commissioned in, I believe, 2017. It was done in 1819 and was released September this year, 2022. If this is the base for decision making, then the spirit of move fast and break. Yeah, the next word. So we don’t really have good it starts there and then the question of where do you make appropriate interventions? And this is like the federal level, but these measures should ideally also be adopted by the state. So you have congruent measures.
[30:37] Matt Clancy: Well, there’s this. So in economics, I don’t know if this is the exact terminology, but we might call it like bottlenecks. And you got to focus bottlenecks.
[30:46] Elijah Eilert: That’s right.
[30:47] Matt Clancy: And there’s Danny roderick is this Turkish economist and he’s done a lot of work on development economics, so moving poorer countries to being richer countries. And his whole approach is identify the bottlenecks in a particular country and sort of that’s what you focus on. It’s not like you have a package of this is what an ideal country’s policy regime should be. It’s going to vary for every country and you have finite political resources, finite economic, and you need to put them on the bottleneck and then the bottleneck changes because if you successfully solve that problem, there’s going to be some new one that you have to pivot to. So you always have to kind of be adapting and moving. And I imagine the same thing happens when you’re trying to foster an entrepreneurial ecosystem. You got to identify what’s the bottleneck in my community and focus on that. Yeah, I don’t know. It’s interesting because it does seem like you said earlier, entrepreneurship is sort of contagious sometimes and it’s like you kind of go through a one way door where once you get the entrepreneurship bug, maybe you want to keep doing it and that kind of speaks to you, prefer it to the alternative. But it’s interesting. It’s like any other change that’s sort of irreversible and sort of changes your values a little bit. Like, I don’t know, like having kids is the same way, right? Like, before you have them and after you have them, you’ve got very different values. Maybe. But you wouldn’t go back. Yeah, you identify real risks and we should have to the best of our ability policy or other kind of support networks, because when you look over like a long term, like 5100 years, there’s a big difference between having a society that has economic growth, which comes from entrepreneurship, innovation, all that stuff, and one that doesn’t. And a stagnating place is not a great place to be either.
[32:46] Elijah Eilert: Right.
[32:47] Matt Clancy: But I totally agree that you don’t want to just build a nice life for your grandkids over the bodies of their grandparents or whatever.
[32:58] Elijah Eilert: Yeah, cool. I think the other part is to translate this morpho corporate to what degree this contagiousness actually works within companies, I’m.
[33:12] Matt Clancy: Not so sure about. But going back to this question about sort of economic growth versus not economic growth, a lot of these ideas that I’m kind of drawing on are closely related to the ideas of this economic historian named anton House who’s over in the UK. And he writes about the Industrial Revolution. And he has this view that sort of something like this contagion effect was an important driver of the Industrial Revolution, which was sort of a hinge point in history. Right. Like things didn’t change much from generation to generation before then, and then they did afterwards. And he’s got research that he’s working on sort of showing the famous inventors of the Industrial Revolution. They often knew other inventors and kind of consistent with this idea that the social idea of an improving mentality, as they called it back then, was kind of learned from your peers. And as it became diffused through Britain, it kind of changed people’s attitudes from sort of acceptance of the status quo to a belief, at least among some people, that we could find new and better ways to do things. You’re more likely to become an entrepreneur if there’s more people like you to be an entrepreneur, but that can kind of trap entrepreneurship in sort of a narrow demographic. And we actually I think we have pretty good evidence that this has been a problem in the United States. For example, you can see this most easily in gender because gender is just an easy thing to study compared to sort of other demographics. But women are a lot less likely to be, for example, inventors listed on patents to come back to patents. And that kind of thing matters because the topics that people choose to work on, whether they’re academic researchers or inventors inventing new products, is related to their background and sort of their own the information that they bring with them from their own life. I’ve got an article called Gender. And what gets researched? That really digs into this on the question of gender. And it looks at, for example, inventors of biomedical innovations that get patented. All male teams are a lot more likely to focus on diseases that affect men and a lot less likely to focus on inventions that affect women. All women teams are the reverse. But as more women entered the biomedical invention sort of field, those differences began to lessen. So all male teams became more likely to work on diseases that affected women.
[36:06] Elijah Eilert: Wow.
[36:07] Matt Clancy: You have similar stuff in academia where in, again, sort of biology there’s something called like I think it’s called a gender and sex analysis, where when you’re doing some kind of biomedical paper, you can do an analysis about how does the efficacy of this thing vary across genders and so on, because it might affect people differently. The likelihood that somebody thinks of doing that is a lot higher if they’re a woman. But if you’re in a field where there’s a lot of women like you’re in a little narrow field and you’re a man, you’re a lot more likely to sort of include one of these things. So the diversity of the field kind of affects what gets invented not only because everybody invents to their own type, but it also affects what you kind of consider and what factors you might decide to work on, even if that’s not your type, not your gender. So I guess one really clear example is this really cool study about what happened to the research topics of academics who were working at universities back in the USA in the 1960s that went coed. And so they started admitting female students and they often started hiring more female faculty and so on. And after that change happened, it was staggered across time so you could kind of compare the universities that had gone coed to the ones that hadn’t and you have a nice kind of control and comparison group. And the universities that went coed, they started to do more work on topics related to gender. And it wasn’t just because they hired female faculty who worked on these topics. It was also the sort of men who had always been there. They started working on these different topics when they were around more diverse group of people, basically. And there’s some studies that find similar things on sort of your income background. So like if you come from a lower income group, you’re more likely to invent. I think this was like inventions, but it might have been found companies that sell products that sell to those markets and so on. So basically the upshot is we have this society, it has all these different needs for research, for inventions, it has all these unmet problems. unsolved problems. And big surprise, the people who are most likely to sort of cater to the problems of a certain group are inventors from that group. But if those people become represented in the sort of broader invention system and they’ve got a voice, they’re not the only people addressing that constituency anymore.
[38:53] Elijah Eilert: Yeah, I think that’s great. And that translates really well to growth. I guess just thinking about a company that wants to innovate for growth rather than other objectives. I think that should reinforce some ways of working and methods, and from codesign to making sure you have diverse innovation teams. So I think that translates really well to further support. That what I’m already preaching, so it serves my bias really well. Thank you.
[39:36] Matt Clancy: Always happy to serve your biases.
[39:42] Elijah Eilert: Great. Can we jump to another article?
[39:46] Matt Clancy: Sure, yeah.
[39:48] Elijah Eilert: Cool.
[39:48] Matt Clancy: Yeah. That’s the all clustering week on this podcast.
[39:52] Elijah Eilert: Otherwise yeah, it’s good. You can naturally go down so many rabbit holes and everywhere from this one. Right. I thought it was a really good start too. Really good to start with that. Thank you. The next one is free knowledge and innovation. How the access to libraries boost local patent rates? So how? Access to wikipedia? Shapes, signs? That’s the sentence on there. Tell us something about that. What’s the general idea here and what are the general findings that free knowledge leads to more innovation?
[40:46] Matt Clancy: Yeah. So earlier we were talking about how there could be lots of different bottlenecks to innovating. One of them might be, are there people who are thinking about being entrepreneurs? Another potential bottleneck is, do the people who are open to innovating inventing new things, do they have good knowledge? Can they apply ideas other people have developed elsewhere to solve new problems? And so one way you can get at this is to look at the access to information. There’s three studies that I looked at in this article called Free Knowledge and Innovation. One was looking at the rollout of public libraries in the United States in the 19 hundreds and 18 hundreds by by Carnegie. It’s a study where basically they had this really unusual situation where they were carnegie paid for tons of libraries across the United States in these small towns. I grew up in Iowa City and we have one of his carnegie’s libraries. And what you want to do is you want to sort of see what’s the effect of having access to a library versus not having access. But it’s a challenging problem because the people who are going to apply to get a library, there’s some kind of unmet need, right? They felt like they needed a library. And so maybe there’s people there who always would have wanted to invent whether they got the library or not. And if we compare that to people who didn’t get a library because they never even applied, maybe these people are just, you know, they were never going to invent, they’re just not interested in this kind of thing. So what this paper does that’s pretty smart is it identifies there was like 200 towns that applied for a library. Carnegie said, yes, you’re going to get a library. But then there was these there was this sort of scandal. As I understand it, carnegie put down this strike really violently and so 200 towns basically said, we don’t want the money anymore, we want nothing to do with you. Carnegie and then other towns continue to take the money because they were like, well, we still want a library. And so what this paper does is it compares the people. So now we’ve got only people who applied for and they got there, they were going to get a library, but some group of them didn’t get a library because they were too offended and the other half did. And so they’re not identical. But we hope that the ability to take this moral stand is not necessarily correlated with your inherent interest in patenting and inventing. And then they look at patents because that’s the only kind of innovation metric they have available back in the 19 hundreds, really. But upshot I have a feeling people have got the library.
[43:25] Elijah Eilert: So if we’re interrupting you, then I think we have to we just have to have a separate episode just on patents. So we can always plug that every time. Sorry, could you please say that again? forgive me.
[43:39] Matt Clancy: No problem. We’ve got two studies that are going to have patents here. So if you don’t like and my take on patents, there’s signal and there’s noise. There’s a lot of noise, there’s some signal in there. It’s worth looking at. But you want to always the best you have your ability, complement it with other metrics. We’re not going to be able to really do that in these studies, except for the wikipedia one, which is a little different. But that caveat aside, the guys who get a library, they have like 10% more patents than the ones who didn’t. Then in the 1970s, there’s another study, this one looked at, actually patent depository libraries. It’s not a new building, as my understanding, it’s like a collection of patents that gets updated. So you’re an official repository of patents because back in the 70s, there’s no internet. You can’t go to Google and figure out what the patents are. You have to have a place to actually read them. And they had these things called patent depository libraries where you could go read patents. And back in the 70s they sort of said there’s not enough of these throughout the country. This is again, the United States. And so there was this big push to try to get at least one of these libraries in every state. And what this study did is it again, sort of tried to see, we want to compare people who got one to towns that are pretty similar, but they didn’t get one. And what they did this time is they looked at federal depository libraries, which is like a library that is a repository for all sort of the federal regulations and laws, because these already existed and these were the candidates to be also given access to patents. And so they compare these federal depository libraries who got a patent deposit sort of arrangement to the ones who didn’t. And they look at what happens in the 15 miles around it. Again, pretty similar thing. If you get one of these if you’re within 15 minutes miles of one of these patent depository libraries, you patent I think it was like 20% more than the guys who have one of these federal depository libraries that didn’t get a patent thing. And this study does some really interesting stuff to try to document that. It’s really because people are going to these libraries and reading the patents, they sort of show that the effect is biggest for sort of small firms or individual inventors who we imagine don’t have easy access to get to learn about this stuff in an alternative way. The effect is strongest for chemistry patents, which the paper claims were the patents that sort of disclosed the most information. They actually show you the chemical structure. And they have this really interesting sort of text analysis thing where they look for patents that introduce a new word that’s never been in any patent before. Like the word Internet was in some patent for the first time, I think it was in 1990 in New Hampshire and Maine, because I recently read this piece. So that was the first time the word internet appeared in a patent, right? And then they look at words that have been around, but maybe they haven’t been around. Nobody has invented with them in your community. So I’m from Des moines, Iowa. We have a patent depository library. And because I just read this thing, I know that the first patent from Des moines mentioning the word internet was like in 2011 or something. Okay, seems very late to me. This is in the title, not anywhere in the patent. That’s one thing anyway. And they look through the whole patent. So anyway, the idea is if you’re reading the patents and learning, that should affect your ability to sort of suck up ideas that were developed elsewhere. And they find, yeah, there’s a big effect on patents that use words that are new to your region, but they’ve been around somewhere else. I could read that patent from Maine that said Internet, and I could be like, oh, this Internet is really cool. I’m going to patent a thing based on the Internet in Des moines. But it has no effect on patents that introduce totally new words that are not in the patent system elsewhere. And it has no effect on patents that don’t include these new words, that just include words that have always been around. So if I’m in Des moines, Iowa, probably like combine we probably had patents for combine harvesters and tractors and stuff going back to the 18 hundreds. We didn’t need a new library to tell us that these were cool new technology. So that’s kind of cool and sort of supports the idea that at least in the 70s before people were actually reading this stuff and learning from them. So that’s our second study. The third one is about wikipedia. It’s not about patenting, it’s about science. What’s very clever about this study is the authors paid a bunch of grad students to write chemistry articles for wikipedia, and then they posted half the articles, but they kept the other half back. And so they have a random kind of control and then they look to see what happens to scholarship around the articles that were posted to wikipedia versus the ones that weren’t. And how do you know if somebody’s reading a wikipedia article? They actually won’t usually tell you. Like the scientists writing their articles are not going to say, like, we read on wikipedia that graphene is important or something, because they don’t want to admit that they read wikipedia, but they can show that they cited the articles, the academic articles that were cited by that wikipedia article, at a much higher rate than the articles that never got posted. And they can do another text analysis and they see like similar languages used in the wikipedia article and in the scientific articles they get posted. So they kind of do this experiment and then they also do a thing where they it’s non experimental, but they can do like for all of chemistry because instead of comparing articles that were posted and never posted, they can compare like, well, this article got posted in the year 2010, this one didn’t get posted till 2013. So there’s this gap where we can kind of sort of see what the difference between those two subject areas were. So anyway, it all suggests that scientists are reading wikipedia and it’s having a measurable significant impact on the kind of scholarship they do. So all of this is to say it’s kind of one of these obvious ideas, but it’s sort of nice to have something more than just an anecdote behind it. Like you can see in the data when you give people access to knowledge, and at least in the USA where there’s support, maybe these other bottlenecks about your ability to do research are sort of not that severe. Hey, it helps.
[50:01] Elijah Eilert: Talking about my biases. I like this finding a lot because going to corporate innovation a little bit, there is an issue of accessing insights, knowledge that teams generate for other teams. That’s kind of where I feel like this nicely supports that problem. We often find that in large corporations there are two teams that do the same thing in parallel and they have no idea they’re doing it. Number one, knowledge is an asset, the company’s asset. And not being able to access this asset, this intangible asset, well, I think makes you not very competitive. bolts down your competitive advantage as an organization, as a nation, as we see as a global community, and working on solving that, like pulling little insights out of powerpoints and Word documents and so on, and making that systematic is actually quite a passionate topic for me.
[51:32] Matt Clancy: Yeah, I know people who view this as a hidden upside of remote work is that you have to send so many more emails and write everything down, or maybe you’re on slack. And so it’s really painful. It’s so much easier to just talk to people and quickly solve the problem. But there’s this potential upside, and this hasn’t been studied. I don’t know if this will actually pan out, that you’ve made a record of all the small talk, basically, and all those ideas. And so especially if it’s in something like slack, where which new employees can access potentially, that can help solve problems. And I remember I talked once to a sort of scientist who said that knowledge management in labs was a really big problem, where you could have sort of a PhD student waste a year of their life doing an experiment that somebody did three years ago that didn’t work and nobody remembered that or so on.
[52:33] Elijah Eilert: Perfect. Yeah. This experiment looking for something is an experiment in itself or a research piece, trying to see if somebody already did that before. There’s a term for it. It’s called a picnic in the graveyard. A shout out to tristan if you coined it or somebody else. I’m not sure. That’s where I know it from. And that’s what an innovation team should do and then storing it. So the best solution I know to make that more systematic and accessible are actually report cards. Yeah, make it systematic. People don’t like to fill them out. By the way, surprise, back to you. But that seems to be I cannot imagine how it doesn’t make you more competitive. Like how it doesn’t give somebody in the competitive advantage.
[53:31] Matt Clancy: Yes, I totally agree. I think the part of the equation that gets hard to do over the long term is like, how do you lay out the information in a way that people can find it without knowing exactly what they’re looking for? It’s easy to find stuff if, you know, like, I just need to search for elias last name. I know my conversation was with you, but if I don’t know that, if I’m like a new hire, and I don’t know that you’re the person who has the information and you’ve written the slack thing about it, coding it up in a way to make it discoverable is a challenge.
[54:07] Elijah Eilert: Yeah. Hire a librarian for it. Librarian for it. Having positions. I really think some of the solutions even, like, there’s a data entry problem to begin with, there’s no way teams are super resistant to this. And part of it is that it makes teams more accountable. That’s a problem. But then it’s also, like, annoying. You don’t just don’t want to do data entry no matter what it is. It’s very different from designing something beautiful like a powerpoint and then pitching it. There are at least some positive emotions associated with it, making things look good. That’s a problem. But then nobody other than me is excited about doing bookkeeping. Very few people are excited about accounting the outsourced. Large organizations hire people. You’ve got accountants for this, you’ve got bookkeepers for that. So I think that’s very similar. Anyway, that’s sort of my best chart. Here how to solve this properly. And I think there’s something to be said about sort of an innovation bookkeeper. Understanding the library awesome. The accessibility of knowledge makes at least communities more innovative.
[55:31] Matt Clancy: I think it proves that you might have said, for example, a counterstory would be that learning about past other people’s attempts, you could have a theory that that’s actually bad because it dissuades you from trying things. Right? Like, oh, it’s already been done, and this kind of shows. Well, maybe that’s true, but if it is, the countervailing effects are strong enough that it’s a net positive.
[55:59] Elijah Eilert: Right?
[56:00] Matt Clancy: Like just having all this information.
[56:04] Elijah Eilert: Yeah. So, Matt, you have to go in a moment.
[56:06] Matt Clancy: Yeah, I’ve got a head. But I mean, I think I would just say that the whole idea that information and providing it freely is valuable is like, also a motivating thing for myself and why I run this, like, website. Because I felt like there was all this really interesting work being done by the academics, kind of about innovation. But at least when I started writing it, I didn’t feel like there was any popular Science book that was kind of talking about this work and no one was also pulling these threads together. A lot of time, like, you might get an interview about an individual who did a cool study, but you don’t necessarily see if you’re outside academia, that this is echoing related stuff, so you can sort of be more confident. Anyway, so that’s what motivated me to start the project, I think. Also, going back to our first topic, I was kind of motivated because I was not just in the normal economics department. I was in the Agricultural Entrepreneurship initiative in my first academic job. And so I was surrounded by all these entrepreneurs. And so I think that maybe affected a little bit, like the value of doing something a little bit different, that it wasn’t being done.
[57:16] Elijah Eilert: Who knows? But anyway is contagious, right?
[57:19] Matt Clancy: Yeah, exactly. I caught some bugs from them. I’m not saying I’m an entrepreneur, but I did start something that was a little bit different than what everybody else is doing.
[57:27] Elijah Eilert: Here we go.
[57:28] Matt Clancy: I’ll say that for myself.
[57:30] Elijah Eilert: New things under the sun. That’s your website?
[57:35] Matt Clancy: That’s right.
[57:37] Elijah Eilert: New things under the sun. Yeah. It’s a real pleasure going through it. And your output is quite amazing, by the way. It’s pretty humbling, given that you have to do a lot of research even writing this. How do you do that?
[57:55] Matt Clancy: Thanks. I couldn’t do it if it was not like a hobby project. It’s like a part time job. When I was at Iowa State University, I had grant support, so I worked 25% time on that project, and I got support later from Open philanthropy, and I worked on it sort of even more at the Institute for Progress. And now in my current position, it’s also, like, a third of what I do with my time. So it’s not just, like, a thing I do on nights and weekends or something. I consider it, like, a professional thing, comparable to the amount of time an academic would spend doing their own research or something.
[58:40] Elijah Eilert: Yeah. It makes me feel a lot better. Thank you.
[58:42] Matt Clancy: No problem. Yeah, it’s good to set expectations appropriately.
[58:46] Elijah Eilert: Well, that’s great. Thank you for doing that. And yeah. I feel like maybe we just do another session at some point. There’s so much to go through, and if we can help spread the word sure, anytime.
[58:58] Matt Clancy: Like I said, I think we scratched the surface. I’ve been doing it for years too, so there’s a lot of stuff on there that we could talk about.
[59:06] Elijah Eilert: Yeah. And thank you. It’s really awesome listening to you and putting it out there. That’s been really interesting. Thank you.
[59:17] Matt Clancy: No. sweaty. Thanks for having me on. Thank you. I don’t know what the wrap up thing is.
[59:26] Elijah Eilert: No, we just leave this in. We just leave this in and take it as a lesson. I need to learn how to wrap this up better. This is my fault. Share the failure.
[59:34] Matt Clancy: I will wrap it up to say, I’ve got to go will pick my son up so he can practice the piano before his sisters get home, which is the real truth.
[59:44] Elijah Eilert: Thank you so much.
[59:46] Matt Clancy: Thank you, too.
