Why is it that some countries have raced ahead in achieving economic progress while others continue to lag far behind? It’s a question development professionals grapple with, and one that is important to AKU.
“The key to harnessing knowledge is being able to absorb it and put it to use, to adapt it to local conditions,”said Dr Calestous Juma in a special lecture at AKU on March 20.
Universities, he stressed, are at the centre of this approach.
Appointed to the AKU Board of Trustees in 2013, Dr Juma’s expertise pertains to the application of science and technology to economic development. He also serves as Director of the Science, Technology and Globalization Project at the John F. Kennedy School of Government at Harvard University.
Excerpts from Dr Calestous Juma's speech
Five Ways of Economic Innovation
A large part of my work is really devoted to trying to understand why some countries have grown and industrialized, while others haven’t. I have a second question that I have also asked myself, which is why is it that there are times when latecomers suddenly catch up with the front runners. You would expect that if you’re a front runner you would always be a front runner, but we’ve seen from history that countries that were really poor industrialized extremely quickly and were able to catch up with the front runners.
The real force that explains that phenomenon of catch up is the ability of countries to recognize that economic development is really a process by which you integrate new knowledge into the economy, and it’s that process of adding knowledge into the economy that leads to change over time. This is really the question I wanted to talk about. By adding new knowledge into the economic system you start to create new combinations, new ways of doing things, and there are at least 5 ways by which these combinations express themselves.
The first is in the form of products where you generate new products. The second is in the form of process ways by which you manufacture new products. Third, when you create new markets, and these new markets do not necessarily involve new technologies, but where often you use existing technologies to create new markets. Fourth where you start to change your organizational methods, making the production process more efficient, and finally, discovering and using new materials.
Economic Development: From back-benchers to front-runners
The five ways by which we innovate have been developed and documented quite extensively in a very famous book published in 1911 by an Austrian economist, Joseph Schumpeter. The book is called The Theory of Economic Development. It’s not very well known in developing countries. In fact, it has been used more to inspire policies in industrialized countries and less in developing countries, even though it’s called The Theory of Economic Development.
So, much of what I’m going to talk about is really elaborating on some of this thinking, but putting it in the context of the role of institutions of higher learning, typically universities, and especially the role that they play in this process of economic catch-up. We’ve seen it in the case of South Korea, seen it in Singapore, and more recently [seen] the very dramatic case of China. These were countries that were generally very poor and were not considered to be of any economic significance in terms of international trade, but they have been able to emerge and become very important players, and my argument is that we know enough about how this happens. That any country that is growing very slowly or is a latecomer, can do what those countries have been able to do in the last 40 to 50 years.
One feature that really explains much of this is the phenomenon of an exponential growth in scientific and technical knowledge, in that at every stage a generation inherits a much larger pool of scientific and technical knowledge compared to its predecessors. This is really what explains why late comers end up growing very fast-because they’re harvesting a much larger pool of knowledge.
This process of catching up is really influenced very much by these dynamics of exponential growth and knowledge. Very often policy makers tend to assume that technological advancement occurs in a linear and incremental way, but in fact it doesn’t. It accumulates exponentially, and when countries discover that growth is caused exponentially they start to adopt different kinds of policies, because they realize that maybe the quickest way to start industrializing is to search for existing technologies. When you search and you don’t find existing technologies then you do research. That’s where institutions of higher learning come in.
Computing Capacities of Cockroaches and Mice
We’ve seen this phenomenon of exponential growth in scientific and technical knowledge in the case of computers. This is a very simple illustration of the computing capacity that you can buy with a thousand dollars. There was a period when you couldn’t buy very much, when computers were very primitive. Today with a thousand dollars you can buy roughly the computing capacity of a cockroach, and a cockroach has incredible processing capability. Anybody who has tried to catch a cockroach will quickly realize that it has this immense ability to manoeuvre its way around. In a few years we’ll be close to basically the computing capacity of a mouse.
Raymond Kurzweil, a colleague of mine, and I worked together on a study at the National Academy of Engineering. He actually developed this projection which basically argues that in 15 years computers will be smarter than human beings. I don’t want to contemplate the implications of that for all of us, but it’s an indication of this phenomenon of exponential growth in scientific and technical knowledge. We’ve seen a shortening of time frames from research to commercialization of products. If you follow the developments in information and communications technologies, especially in the computing area, from the time you hear a rumour about a product being developed, in a few months it’s going to be in the market because of this shortening of time frames. That is because we just have these huge quantities of scientific and technical knowledge. In addition to that we also have managerial expertise that has accumulated over the years, which we deploy very quickly.
So my claim is that we are really in an age of abundance. In the past we used to be in the age of scarcity, where the preoccupation was trying to figure out how to develop your own ideas. My argument is that today we have a different policy challenge, and that challenge is managing scientific and technical abundance.
It’s estimated that in the area of information and communication technologies, scientific and technical knowledge and the associated capabilities double every 14 months. That already is a hint to what is possible, and if that capacity is doubling every 14 months that means in many cases we are better off starting to use what exists, because by the time you start investing in research the technology has moved on. The advantage of using what exists is that by the time you harvest and put to use existing technologies, you will also have revenue coming from their use that you can invest in new technologies. If you’re very poor and you’re trying to do basic research you start to run into a lot of difficulties with the allocation of funds, as well as debates and politics around how much money is being located to research and development.
The Evolution of Brick Phones
This is a very well-known phenomenon- the story of mobile phones. The first cell phone call ever made was in March 1973. Exactly 10 years after that the first mobile phone was released on the market. It was in the same month that the charter of this university was issued, so this university is as young as cell phones.
In 1956 when Erickson, the Swedish company, developed the first mobile phone, it weighed 42 kgs. You could hardly use it to update your Facebook status or to tweet.
It was just the central unit and you needed a cart to carry it. At that time this whole unit cost more than the car, so only established institutions like the military, the police, and fire brigades could actually afford to use mobile phones, but very quickly because of this exponential growth and technical knowledge, they started becoming available to very rich entrepreneurs.
Martin Cooper, the gentleman who had observed this trend’s expansion of capabilities, reasoned that if those trends continued, mobile phones could become ubiquitous and available to everybody who could afford it. So that’s the first mobile phone by Motorola in March 1983. It cost about $5000, weighed 2 kgs. It took 10 hours to charge and had only 30 minutes of talk time. And so pessimists started referring to it as the Brick phone because they didn’t see a possibility of actually getting anywhere, and the rest of the story is really history, because we now have industries that now have grown out of mobile phones - for example the money transfer industry, which is one of the biggest inventions that has come out of Africa in recent years, out of Kenya.
Creating New Economies with Available Knowledge
The Kenyans did not invent the mobile phone, but they repurposed it and developed new industries around it, and now they are developing apps. There’s now demand for understanding the mathematical principles because they have to develop all these new algorithms, so we have another example where technology is driving the science as opposed to science driving the technology.
If Kenyans started to reinvent their own mobile phone, they would still be working at it and probably be very frustrated. We’ve seen the same phenomenon in the area of life sciences, where the human genome sequence in 2001 cost $100 million to sequence. It took about 13 years to complete the job. As of December last year, a company called Illumina developed a new sequencer, which sequences a human genome in two hours at the cost of $1000. That means the cost of any poor country moving into genomics is the cost of financing an undergraduate student, because of the dramatic drop in the cost of sequencing organisms. You can now do really interesting work that is very relevant to local conditions, so that you don’t have to use material that has been sequenced or selected for other purposes.
These advances have opened up huge possibilities for developing countries, and the best way to harness this capability is to start introducing courses in universities that allow students to start moving into genomics, because the technologies already exist, the sequences already exist. In fact, the biggest challenge in genomics is basically figuring out what do sequences actually do, and different countries will be looking for different functions so you may have Pakistani students looking for sequences that are of relevance to Pakistan. Chinese students are looking for sequences that are of relevance to China. So it opens up doors for countries to become players in a way that was not possible a decade ago when it cost $100 million to sequence a genome.
Students as Venture Capitalists
The other areas where we are seeing really interesting innovations are at universities. It’s where universities start to prepare their students to be agents of change, preparing them to entrepreneurs before they graduate, not after they graduate. So that by the time they graduate they have gained some skills on how to create and run an enterprise.
A very interesting example is the Pontifical Catholic University of Rio de Janeiro in Brazil, which has two graduation ceremonies: one is for students who graduate with their certificates and the other one is for companies graduating from the universities. Those companies were created by students and faculty, and they graduate at the same time. And the students are thinking about who they are going to hire, interviewing potential candidates before they graduate. So they graduate already as CEOs of their teams of workers.
And universities are going even further right now, to creating venture capital funds, so they can finance students before they actually leave university. So there are a lot of innovations that are taking place in this space of higher education to make it more relevant to contemporary challenges. Some export products. There is a university in Costa Rica on whose board I served for a couple of years. Roughly 80 per cent of the bananas sold in Whole Foods stores in the US come from that university.
So students are learning on the job by growing bananas that they export, generating revenue for the university. And it’s a very interesting model, because the way they teach is highly practical. In the first year they have what is called work experience, because it is an agribusiness school. So the students wake up at 5:30 am just like farmers. They go to the farm with their professors at 5:30 in the morning. And what is interesting is that’s the period when they are ploughing. In the afternoon they have classes on sowing sciences, so things are fresh in their minds. Because they remember, they ask very practical questions such as “why is it that it is harder to dig over there, and not over there?”
Whenever the students come back to the professors, the professors disappear. And I used to think the professors disappeared because they are tired and are going to have a nap. It turned out that the professors are anticipating the kinds of questions students might ask. And they are in the library doing research. So when the professors come to the classroom in the afternoon, they are thoroughly prepared. And the intellectual atmosphere in these classes is absolutely remarkable.
They have another period of 18 months where they get a loan from the university of up to $3000, and they get up to five students and create a real company. When they are doing the feasibility studies they do a course on business planning. Then they start production, and take courses on production related aspects of what they are producing, and at the end of the 18 months they take courses on how you wind down a business. It turns out that winding down a business is very often harder than starting one, because you have emotional attachments to the business.
So they have a sustainability programme where they have to clean up the environment so the next generation of students will find it the way they left it. So very hands on but highly academic. At the end of the four years the students don’t write dissertations. They have the option of writing a dissertation or writing a business plan. And most of them opt to write a business plan, because they have experience on how to create and run an enterprise.
I did an evaluation of their performance a few years ago and we found out that after one year of graduation roughly 20 per cent of the students have created their own enterprises, because they are trained to create enterprise, not to go look for jobs. Some of them come from farming businesses and they go back to revive their family farms. So this whole year of creating start-ups should be an integrated part of universities. And universities are perfect incubators, except that we tend to focus incubating one category of products which is students. But the idea here is that when you incubate students you can incubate enterprises.
The only work that seems to work, if we can do this and will, is to reposition the universities, so the universities can act as agents of change, so the possibility of catching up as a late comer significantly increases. That is my challenge to the Aga Khan University!