The Ideaspace

Interviews, essays, and research exploring the frontiers of what's valuable and in our self-interest

Professor Mariana Mazzucato on how to create value

Interviewee: Mariana Mazzucato
Background: Professor of Economics and Founding Director of the UCL Institute for Innovation and Public Purpose, Author of Mission Economy, The Entrepreneurial State, and The Value of Everything
Topic: How to create value
Listen: On the web, Apple, Spotify

“I think of it like a fight, like guerrilla warfare. You build up your adrenaline to do it. Even though it might be easier to do research and say, ‘Oh, and here's the policy implications of my research’ in the typical academic way, which is what I used to do, you’re on the front line repeating your message.” — Mariana Mazzucato

Sup y’all, and welcome to the Ideaspace.

Few people living today have as much influence on how the world runs as the author, economist, and professor Mariana Mazzucato.

Ever since her first book, The Entrepreneurial State, Mazzucato has carved out a distinct path in economics and public service. The Entrepreneurial State is one of those rare books that completely changes how you see the world. After reading it, you won’t look at an iPhone or prescription drug the same way again (more on why below). Her second book, The Value of Everything, methodically poked holes in our assumption that financial value is the one form of value for everything (a theme my book This Could Be Our Future explores as well).

Today Mariana is one of the busiest people in the world. In addition to founding and leading the Institute for Innovation and Public Purpose in London, Mariana has advised everyone from AOC to the Mayor of London to the Prime Ministers of Italy and South Africa on how to best reinvigorate government and create value and innovation in society.

Mariana’s brand new book, Mission Economy, explores how to create value and innovation by closely examining the Apollo moon landing mission in the 1960s as a case study on what happens when governments set bold, ambitious policies that require widespread collaboration to solve. Missions like these, she argues, can transform society and produce enormous amounts of “spillover value” that all of society shares. The Apollo mission, for example, ultimately produced the internet, software development, camera phones, tennis shoes, and a dozen-plus other key inventions as unexpected side effects of the larger mission.

Few people have influenced my thinking as much as Mariana Mazzucato, which is why I’m so excited to welcome her to the Ideaspace to discuss her work, theories of value, and how it feels to push so hard against the grain. And despite the seriousness of her work, Mariana is a vivacious, incredibly fun and inspiring person as you’ll hear in our conversation. Listen on the web, on Apple, or Spotify. Read a complete transcript below.

YANCEY: The new book is fantastic. Your best book yet.

MARIANA: Really?

YANCEY: The way it ties together the past research and lays forward a plan, a plan that feels very much right for the moment. It really feels like this is the time for these ideas. And swear to god, I literally pumped my fist in the air after reading the last chapter, and the last sentence about taking the fight. It's just very well done, and I’m just very impressed.

MARIANA: That’s so nice. I almost want to cry. Like with Meghan Markle, when they asked her, “How are you?” Because actually, I get a lot of hate. Academics are always supposed to be kind of objective, “pros and cons,” and everything kind of averages out. You're not supposed to really express an opinion. For a long time I've actually been calling out the Pfizers of the world — Pfizer is one of the most financialized companies, by the way, in the world — and so you get the resistance on that side. But also within progressives. It’s funny. When you just say things how they are you open yourself up to quite a bit of attack. And if you're having influence, if people are actually listening to you, the attack is stronger. If no one's listening to you who cares what you say. You can say whatever the hell you want. Recently, I've been a bit like, “ugh, not again,” in terms of the bogus attacks. So thank you for saying you like the book!

YANCEY: The Entrepreneurial State and The Value of Everything are both books that heavily influenced my thinking, but I feel like Mission Economy goes a step farther. Not just you as a policy analyst and economist breaking things down, but you're also trying to put things back together again. I found that to be an ingredient maybe I didn't know I was looking for in the previous books, but especially towards the end, the last few chapters, I thought it was it was great the things you lay out.

I think of you—and I think it's fair to say—as one of the most influential people in the world. You’re named to this UN High-Level Advisory Board on Economic and Social Affairs. You're the co-chair of this World Health Organization board of all women.

MARIANA: Oh, I haven’t told anyone that yet, but good.

YANCEY: I heard you mention that to Kara Swisher the other day.

MARIANA: Exactly. And I told her that: “You're the only one who knows!”

YANCEY: Just me and Kara. [laughs] You're advising heads of state and national and local governments. And the Pope got indie cred for name dropping you in his book. So why are the most powerful people in the world coming to you? And how closely does the message in Mission Economy track with the kinds of conversations you're having?

MARIANA: Maybe I'll start with the second one, which is the reason I wrote the book. There was a real thirst, already, for the last ten years that I've been writing Entrepreneurial State and [The Value of Everything], around these ideas. But what does this actually mean for the nitty-gritty of procurement design, or the redesign of industrial strategy away towards this a purpose-driven? That “how” is the reason I wrote it. But also the hope — it’s actually a pretty positive story, isn't it? Especially in a world now with so much polarization at every level, and distrust. Hope that actually we can do better. We got humans on the moon and back again when we treated it as an urgent problem. What if we actually treat as urgent—as a security risk even—our social problems? Treat it with the same level of boldness, creativity, and inspiration, but also the intersectoral investment innovation, that we had when we went to the moon? Even though these social problems are so much harder.

So that hope that we can do better. It's going to be also fun, potentially, bringing lots of different voices to the table in terms of that co-creation and co-design, which is what I was just talking about a couple minutes ago with the London Mayor. We're helping London, but also specifically Camden Council, which is a part of London where I work, to nest this idea of a mission-, purpose-driven approach into how a council or city thinks about itself. What does it mean to bring housing associations and different types of citizen groups to the table and actually ask, “How do we want to live together?” It’s not just a future mobility plan that you feed in this top-down way. Actually: “Let’s talk about it.” And it might be a debate, there might be contestation along the way. But we can actually design—bringing that concept of design to the table—a better way of living.

It's going to be hard. It means really unpicking all the problems right now in terms of how we come together. Or when we don't come together, when we don't listen to each other. But the book is really, as you said, almost like a recipe book. Like, “Okay, let's unpick what this is going to mean for how we confront, for example, the [United Nations Sustainable Development Goals].”

YANCEY: And the thirst in government is for what? Tell us how to revitalize our state, help us feel passion, connect us to a purpose? What is the thirst for?

MARIANA: The thirst is to put yourself in the driver's seat. Feeling miserable when at best you’re a cheerleader. I used to joke that I would walk into meetings with civil servants as an economist and I'd walk out as a life coach. This idea that actually the point of policy is not just about fixing markets, but actively co-creating and co-shaping. You can be purpose- and mission-driven. That requires taking risks, being an investor of first resort and not a lender of last resort, not de-risking, but, again, sharing risks and rewards. All that is a new narrative. It's a new story. And it's quite invigorating, isn't it? It's like, “Oh, okay, fine. I'm not here just to facilitate Elon Musk so he can do great things. Actually, we need entrepreneurialism within the civil service, but also capabilities, capacity.”

What’s so interesting about the COVID period—if one can use the word interesting with such a tragic situation—is there's been such different experience globally in how countries have handled it. Some of the countries that are in the developing world have done quite well, like Vietnam, Cambodia, India, have been the ones making over the last decade serious investments within public administration. But whereas we have business schools talking and thinking with business about how to create value, we don't use value creation, wealth creation, wealth creators in the context of the civil service, the public service, and the state. There's a thirst for that after being depressed with the opposite narrative.

I actually opened up The Entrepreneurial State back in 2013 with a quote by David Cameron, who said, “Civil servants are the enemies of enterprise.” That’s come back to bite. Because the way to really dismantle the state is not so much necessarily to defund it, because money comes and goes—you can increase the budget—but to really demolish its sense of confidence and organizational structure. That’s what's actually happened over the last half-century.

YANCEY: In The Entrepreneurial State you showed how much of Silicon Valley began through publicly funded research. You demonstrate how every part of the iPhone originated in that way and the same is true of a lot of pharmaceuticals. You show how goods that were created through public research are now sold on the private market.

That was published about a decade ago. And the first time I read it, I was shocked. The idea that not only did the iPhone originate through public research projects, but that Apple had gotten a federal loan early on in their life—this was completely unknown to me, and I was someone that was working in tech. That changed how I saw the role of the state.

What led you to write The Entrepreneurial State? How did that start?

MARIANA: It's very odd, actually. I wrote it as a pamphlet first, in 2011. I teamed up with Demos, a think tank here in London. Normally they have to find funding for things like this, but I was like, “No, no, I need to write this urgently.” I said I’d fund it through some overheads that I had for a big grant that I had received. I said, “All I want you to do is just print it and post it, like literally get an envelope and then post it to every policymaker that you know in the world.” And it was free on the web. It was literally open-source. It still is, which is not a good idea, to write a book and have a different version of it completely free. But the book version is a much more expanded version, which I ended up later writing in 2013. But the reason I wrote that 2011 version in a rush was quite tragic: my mother also died during the period I was writing. It was really hard to write.

But I wrote it in a rush, because I felt that what Britain and much of Europe was experiencing—some ways less so in the US—was all this austerity after the financial crisis to reduce public budgets. Very much, again, what is being talked about now. Because we've put in all this money because of COVID relief, there's talk about, “Oh, we're going to have to tighten the belt later.” That happened with the financial crisis. A lot of relief came in right away, and then immediately, “Oh, we got to cut the deficit debt.” But the narrative wasn't just “We need to pay back all this money that we spent,” it was, “This is going to be good for innovation, it’s good for competitiveness.” Especially in Europe, where they were asking the age old question: “Why does the US have Google and Amazon and Apple and we don’t?" And their answer was always, “They have venture capital. We have great science at Oxford and Cambridge, we just don't have enough venture capital.” I was like, “All right, let's unpick this a bit. You're cutting the public budget in the name of innovation, saying you're going to do that in order to be competitive, to have the Googles. Well, guess who funded Google's algorithm? Uncle Sam. Guess who funded Tesla's early investments? Uncle Sam. Guess who funded everything that makes our smart products smarter—internet, GPS, touchscreen, Siri, and so on? The taxpayer.”

It wasn't just to say, “Look, the state is great, it funds all this stuff.” It was to say that if we really want to have that innovation-led growth that so many countries starve for, you need to better understand where innovation comes from. Of course it’s critical to talk about the private sector, but we know that. That story is out there. I don't have to help tell that story. But the role of the public sector at best is talked about as fixing markets, or people like Bill Gates—unlike Peter Thiel, who goes on the opposite story—sensibly saying things like, “We need more publicly-funded research,” because he admits that he and Steve Jobs and others completely depended on that. That's true, but it wasn't even just basic research. It was also applied research—the ARPA/DARPA model is about the applied side. It's also about patient, long-term, strategic finance. Countries like Israel have had public venture capital funds like Yozma that provided patient, not impatient, capital. So yes, venture capital is important, but often the VC sector is exit-driven. They want to exit relatively quickly in terms of the long lags that innovation has through an IPO or a buyout. That rush to exit has actually caused a lot of damage in some sectors like biotechnology—I’ve written about this with Bill Lazonick—where we've ended up with lots of product-less IPOs because of that rush. The science-based sectors need time.

That patient long-term finance has often come from the public sector through programs like the SBIR program in the United States that basically is public finance through procurement. Every department needs about 3% of its budget—whether it's department of health, environment, defense—to go to SMEs, not because they're SMEs, but because they're procuring innovative solutions for that department. Even further downstream: bold demand-side policies. My colleague Carlota Perez argues, for example, that without suburbanization, the mass production revolution, which was a huge technological and organizational revolution, wouldn’t have had its effect in the economy—in terms of productivity increases, changes in production and distribution—because all these mass-produced products were then going out to the suburbs—dishwashers, washing machines, cars, and so on—and that helped to deploy and fully diffuse that. So that's a lesson today: what are the demand-side bold policies that we could have, for example, around a greener economy?

I wrote the book both to tell that innovation story, which I still think is just not known enough, but also to combat what at the time was really foolish austerity, which simply got countries into even worse of a mess. Forgetting Keynes' whole point that when you're experiencing a crisis the last thing you want to do when you’re government is to do the same thing that consumers and businesses are doing, which is to spend and invest less. Otherwise a recession will turn into a depression. And it caused huge uncertainty in people's lives and equality. The kind of knife-crime epidemic that we're witnessing right now in London is very much on the back of a very long austerity period we've had here, where youth centers have been cut, mental health support has been cut, the police have been cut. That's brought misery in the name of innovation.

YANCEY: As you were putting out first the pamphlet then the book, were you anxious? Were you nervous? You were coming in with the opposite message that everyone else was saying. Did you feel confident doing that or did you feel uncertain?

MARIANA: I'm sure I have lots of faults, and my kids will tell you many. [laughs] But insecurity and lack of confidence isn't one of them. Not because I’m arrogant or something, but I just don't think of what other people are going to think about it. I just think, “This is going to be important.” And it is important. And it's important, also, to realize you're not alone. You need to work with others in order to get the message across. Which includes, by the way, good media, like now yourself with a good podcast series. But being also willing to go on the media. That maybe sometimes at the beginning brought me nervousness, because I wasn't used to that, going on the news at 10:30 at night, which is one of the best news shows here, BBC News Night. It's great and thrilling in the beginning, but it's also extremely tiring. I'd rather be at home putting my kids to bed or just getting a good night's sleep.

I felt it more like a fight, like guerrilla warfare. You build up your adrenaline to do it. Even though it might be easier to do research and in the end to say, “Oh, and here's the policy implications of my research” in the typical academic way, which is what I used to do, being on the front line repeating your message. My dad used to say, “You're always saying the same thing!” “Yeah, but it's to different people, Dad, it's okay.” Saying it to different types of policymakers, different levels of government—local, city, regional, national, international—and also having the patience with the team that I've been building in my new institute to then work with policymakers. That's where a lot of the both adrenaline but also happiness comes from, because when you're working with people and getting your hands dirty it's always going to be actually quite enriching. Because in general, people are nice, especially those who go into the public service. So instead of just saying, “Hey, don't do austerity, invest! Interest rates are low!” That's not enough. How are you going to do it?

So working with policymakers building a new public bank in Scotland. Redesigning industrial strategy to be problem-focused, not sector-specific. Redesigning innovation policy with the European Commission. Working at that city level with different mayors—that’s quite thrilling.

But also coming back to that concept of empathy — you need to be listening as much as you're talking, right? In the Institute for Innovation and Public Purpose that I've set up here in London as part of University College London, we call it “practice-based theorizing.” You might have a great theory of something, like, you need more patient, long-term finance, public banks, or wealth funds. Fine, great idea. Then go on the ground and start working on it, whether it's with the state of California, or if it’s rethinking public banks in South Africa, and so on. And you realize, actually, this is much, much harder than we thought. Bringing back that experience, the learning on the ground, to the theory and back again, that kind of feedback between theory and practice is important, and I unfortunately don't think that's how universities work. I don't think that's how academics work. Part of our job is to also rethink the university, rethink what it means to be an academic in order to really engage in that ground-level wayWe need the blue-sky thinking of course, but bring it to the ground, learn from it, and bring it back to the theory.

YANCEY: The new book Mission Economy is all about missions. I really appreciate how you talk about how the tension of missions is that they will often be top-down. The PM, the CEO, whoever, dictates “here's what it's going to be” and people are expected to follow. You talk about how we’re in a different era where there is actual dialogue and potential for engagement. So how can we make missions less top-down?

MARIANA: First, what I mean by a mission-oriented approach —and I think this is just important for definitions because people might mean different things—is one that is bold and inspirational but also gets lots of different actors together. It's not about one big project. “A big offshore wind plant, that's the mission.” No, the mission is a proper green transition with a very particular target around it, whether it's having a carbon-neutral city by, say, 2030, and then getting all sorts of different sectors—from real estate, to mobility, food, the social sector, construction, and so on–to work together to deliver that. Picking the willing, not picking winners, that old-style thinking of what it means to have active government policy.

That question of who decides what the mission is is what you're asking, right? Is it just like a minister, or an academic like myself going into a country advising, saying, “Oh, you should do that!” The answer is no, especially if we're talking about societal missions, like those that are embedded within the 17 Sustainable Development Goals.

I begin with the moon landing, because I think there's so many interesting lessons there. When I talk about today's social problems, from inequality to issues around health and climate change, it's not a cut-and-paste job, in terms of applying the lessons of the Apollo project. However I think it's important to first say what we can learn from Apollo, which is how business worked with government in a much more symbiotic way than we have today.

It wasn't just aeronautics. It was lots of different sectors, from nutrition, materials, electronics—the whole software industry, one could argue, came out of that. But what fascinated me was how the head of procurement at NASA had a clause of “no excess profits.” They were saying, “We’re not going to turn this into a gambling casino. We’re gonna work together, and you're not gonna just charge whatever you want to NASA.” They really took care in designing procurement away from what it had been, which was this cost-plus model where costs were being inflated and quality wasn't very high, to a fixed-price model: a procurement with constant incentives for innovation and quality improvement. It was retaining cost down, but you got bonuses when you did great things. That confidence that NASA had in terms of how it was partnering with business, and the dynamic capabilities that NASA knew that it required in order not to get captured by what they called, “brochuremanship”— I love that. It's kind of like today's PowerPoints. That's such an interesting insight and something I've been stressing for a long time with governments: you yourself need to be capable in order to partner in an intelligent, strategic way with business. Of course business knows it's a value creator, so it makes those investments. As a government, if you don’t have agencies that are investing within their own public administration you're not going to do very well, and you're going to partner in problematic ways and you will get captured. That's an important lesson.

In terms of who decides the mission, of course the Apollo program was quite top-down. Whereas today's climate change missions, for example, the work we're doing in London, is nesting that within the social housing estates, bringing housing associations to the table, different citizens who are living in social housing talking together about how do we want to live together, and using that design ex ante of the mission itself. Not just reacting to it afterwards. Similarly, trade unions. The labor share of global income is at a record low level. There is no problem right now with profits. There’s really a problem with investment. I wrote about that with my other book on value, and that kind of value extraction which you also talk about, of course, in your work, Yancey. That itself has not helped workers because people are not being invested in. Skills and jobs are not actually reappearing when so much value is extracted out, for example, through share buybacks. Getting workers’ voices to the table. Being part of the planning of a better capitalism means bringing workers voices to the table to also design the missions.

YANCEY: In Mission Economy you return several times to the idea of collective value creation. Quoting one part you write:

“The dominant economic framework rests on the assumption that people maximize their own preferences. Collective effort is missed, because only individual decisions matter, with firms maximizing profits and consumers maximizing utility (a proxy for happiness). In this context, the concept of social value is limited to the aggregation of individuals making decisions to maximize their own economic welfare.”

What do we miss when we only see value as being created or held at the individual level? What’s the other way to see value creation?

MARIANA: That's the key point that I made in the book The Value of Everything, where I unpick different value theories and today's value theory taught in every economics class globally, kind of Econ 101. We only look at business as a value creator, and also value is basically an outcome of all these different individuals making their decisions. They're maximizing their individual preference, right? Workers maximizing choices of leisure versus work, consumers utility, and so on. We aggregate those behaviors and draw our fancy supply and demand curves and there's an equilibrium price. In economics we learned that these equilibrium prices also then reveal value, right? They actually reverse, with the flick of the wand, a century or so of economic thinking, which had done the opposite. The classical economists Adam Smith, David Ricardo, Karl Marx, began with fundamental questions of what is value, who's producing value. Both Smith and Marx talked a lot about, for example, the problems with landlords at the time, who were extracting value out of the system. Similar to today, how many people might argue that hedge funds and a lot of the private equity industry and financial sector is extracting value, not necessarily creating it.

They had an objective theory of value, not a subjective one — subjective meaning everyone's just doing their own kind of individual preferences. They had an objective one, not in the sense that it was deterministic, but they actually looked at production: who's doing what and who's earning what from that. That’s also why Adam Smith cared about things like productivity. He was looking at the pin factory and how much more productive pin-making could be if there was a greater division of labor in production, and looking at that organizational and technological change, which he thought was fundamental to increasing growth and the wealth of nations, the title of his great book.

When you move to a completely subjective theory, you end up being much less capable to even distinguish things like profits from rents. So profits, one could argue, in terms of how the classicals were looking at it, can be seen as an income derived from capital of creating a new good and service. Rent is just moving around existing assets and charging people for it, like a troll under a bridge, “Pay me to be able to cross the bridge.” All the immense fees and financial intermediation sector could be seen as rent. And yet simply because there's a price being charged for something, we include that in GDP and call it something like a service for financial intermediation, or a service for risk-taking, if we look at the investment banks.

When we completely get confused between value and prices we get ourselves in a huge mess. Value extraction and value creation aren't the same thing even though they both have a fee or price attached to it. But because that's all we're looking at, we’ve confused price with value. Mark Carney read my book, and his reflexes–his first one, at least–he said this, in his first lecture, he talked about his amazing experience heading up the Bank of England and the lessons he learned in terms of: it’s very hard to redesign, or re-steer, a financial system, when we're confusing what's valuable. That’s really hard to do when we don't know how to measure the outcome of, say, of a well-designed Public Health Service. In the United Kingdom, where I live, we don't pay a penny for healthas long as you're a citizen here. Regardless of whether you're working or not, you get access to a very good public health system. We know how to value the costs of that—costs of nurses, costs of doctors, costs of the hospital. That goes into GDP. We still haven't managed to include into GDP the value that's actually created from all the good stuff that comes about from having a well-functioning public education system and public health system when it's free.

If you think about how we determine productivity, output per input—if we only know the price of the input, not the price of the output, it's going to be hard to even talk about things like productivity of the health service. You have Lloyd Blankfein, the head of Goldman Sachs, one year after the financial crisis, saying that Goldman Sachs workers are the most productive in the world. You could laugh, but he's right, in terms of how we measure value. Yeah, they're earning a hell of a lot of money. And if we're confusing incomes, prices, and value, of course they’re the most productive in the world. So if we want to re-steer an economy to be more inclusive, sustainable, less financialized, more investment driven, it has to go down to first principles of this sort.

YANCEY: I'm curious about your instincts for addressing this. It seems like there's one project I see a lot in areas of climate: “Let's put prices on everything. Let's convert forests to dollars, so that we can account for the whole world. It all goes on the ledger.” There's another potential response, which is creating new forms of value that price must compete with, or that add to how we think about price. How do you think about trying to square this circle of this gap between price and value?

MARIANA: It depends at what level of analysis. There's a micro, a mezzo, and a macro level. There's been lots of discussion how at the macro level, we need, for example, alternative measures to GDP, precisely because of the reasons I was mentioning. If we only include things with prices, when you marry your babysitter, GDP will go down; when we pollute, GDP will go up. Right? I'm sort of joking, but not really. When we are confusing price with value, all these weird things happen, which feminist economists have been talking about for a long time, as well as environmental economists. Those two examples are perfect ones: care—now that we're calling all these frontline workers and care workers essential workers, we're using the word essential and still don't know how to value them. It's a real insult. Instead of clapping for healthcare workers, we should at least not only value them but also pay them properly for that value.

The problem is, though, if we focus too much on the price bit, you also get into policies which at best try to correct for those price dysfunctions. So for example, you might have people argue that we need carbon taxes, which make companies actually cost the pollution that they're creating. As important as that is, the over-focus on incentives, thinking that you can correct the system just getting the prices right, creates another dysfunction: we forget that broader point that I was making before with the Entrepreneurial State, which is actually there's a huge portfolio of different policies we need. Of which one surely should be “let's make sure we actually get the prices right,” but that's definitely not going to be enough. We would have never gotten the internet revolution, the nanotech revolution, the green revolution, the whole space tech revolution, had it just been about incentives and getting the prices right. It required vision, a mission, and so on.

At the micro level, it’s how companies behave. This idea that we also need different types of corporate governance away from just focusing on another type of price, which is share price, towards a broader notion of stakeholder value. The Business Roundtable wrote that letter two years ago in the New York Times about it. Larry Fink the year before from BlackRock saying, “Oh, we’ve kind of screwed up, we need to be maximizing this broader notion of value.” And then nothing changes.

The problem is we try to change things just within one of the actors in the system. Why? Because we continue to pretend they're the only value creators. Most of the people that talk about stakeholder value in the same sentence will say, “Business creates value. Business is the wealth creator, we need to make sure that value is shared more broadly.” No, no, no, hold on, back up, wrong. Business is one of the key value creators, of course, but so are these other actors in the system. Again, that was the point of The Entrepreneurial State. So how do we share that value in this kind of pre-distribution way, in that ex ante way, through the initial recognition that we're actually collectively creating value? That is what would create a different relationship, for example, between the public sector and the private sector, in terms also of how they negotiate. Coming back to that NASA example of no excess profits—well, why? Not because it's unfair, but because actually, you're not the only one there, right? Boeing or Motorola or Honeywell, these companies that help NASA get to the moon, they were part of this wider social ecosystem. Collective value creation needs to be nested within the contracts, the relationships. Stakeholder value has to be at the center of the system, not just the corporate governance discussion.

These are all parts of the answer to your question. You're not going to fix the system just getting the prices right. We need a host of different types of policies, but also different relationships that recognize value is being collectively created.

YANCEY: Over the last ten years a lot of the economic conversation on the left has focused on redistribution, but you mentioned something very different there, which is pre-distribution. Can you talk about what that is?

MARIANA: Pre-distribution has been used by different people. It’s the argument that in order to really tackle inequality, you can't just pick up the mess afterwards through redistributive policies, like progressive taxation policies. We need progressive taxation, but it's going to be really hard to fight inequality if you're always doing it through tax, because that assumes you allow things to operate as they do and then you fix it afterwards.

Pre-distribution: the “pre” bit means before. That means that we need to get the relationships right in the first place. Things like how they are sharing the rewards — that no excess profits clause that NASA had, but also potentially with equity stakes of governments in the companies that they fund. The US government funded both Tesla and Solyndra almost the same amount of money. It had to bail out the Solyndra loss but didn't get any of the upside from the Tesla investment. Which, of course, was high-risk. For every successful Tesla investment, you will have six or seven Solyndras. Talk to any venture capitalist, they'll tell you that. But what Obama did was the opposite of a pre-distribution strategy. He said to Tesla, “If you don't pay back the loan”—why wouldn't they pay back the loan? Because something goes wrong—“we get 3 million shares in your company.” Had he said, “We get 3 million shares in your company if you do pay back the loan, because it means you're successful, and you will owe some of your gratitude to those that made it happen”—the price per share between 2009 when they got it and 2013 when they paid it back went from $9 to $90. That difference multiplied by 3 million would have more than paid back the Solyndra loss and the next round of investment. That kind of public venture capital investor of first-resort attitude would determine, in a pre-distribution way, how you think about not just the public investment, but also the sharing of the rewards. You don't just have to redistribute afterwards. Making sure that people are paid the living wage, it's not rocket science, it's crazy that some of the richest companies in the world still don't do that, is a type of pre-distributive policy.

William Baumol, the late economist, used to talk about patents as causing unproductive entrepreneurship. Not because patents in and of themselves are bad, but we've allowed them to be used for rent seeking. They're often too wide (used for strategic reasons), too strong (hard to license), too upstream. They used to be much more downstream, what was allowed to be patented, now it's very upstream so the tools for research are being patented, and all that just creates a lot of value extraction. The health sector is the worst. Today, for example, with the vaccine, making sure that it's not just a public-private investment program, which of course it has been hugely successful, but unless we govern the intellectual property rights to really nurture the collective intelligence we now need as much of the vaccine knowledge is shared and also making sure we don't allow the dose to be hoarded by certain countries, we can make sure that we have things like a patent pool, which is what the World Health Organization has been arguing for.

All of these things I just mentioned could be parts of a pre-distributive lens, which is to get the governance of collective value creation to reflect public value.

YANCEY: If there's some basic research happening now that's being funded through some grant and say it goes on to produce a new web platform or new pharmaceutical drug 10 or 15 years from now: how would you argue for that being structured differently than we've thought about those things in the past? Or is it just that we should be aware that these investments we're making are creating value? Is it about realizing a financial return? Is it about just realizing the value of this in general so that we're not starving ourselves with this investment?

MARIANA: I think it requires different things. Thinking of it just as a financial return brings us back to the initial problem, which is we become very short-sighted and just think about “What's the money that's going to be created?” Thinking about that too much ex ante doesn't get us those moonshots. Had we had a cost-benefit analysis or net present value calculation of the Apollo program, it would have never begun.

If we just think of it in terms of financial return, it's a very narrow way to think about this bigger issue, which is really sharing both risks and rewards. There can definitely be measures which have to do with the financial return, like the example I just mentioned with equity stakes, but the broader point of how do we govern the system for a concept like the public good and the common good? That means paying attention to lots of different details, like governing the intellectual property rights, or having conditionality that the profits that are outcomes of this collective value creation get reinvested back into the system as opposed to extracted out through practices like share buybacks could be the way you govern this system to get a public return for the public investment. I often remind my colleagues that Bell Labs, which everyone knows about, hopefully, having been one of the most dynamic private sector R&D agencies at the time. The reason it came about was because the government basically forced AT&T, who had a monopoly status at the time, to reinvest their profits back into the real economy, back into innovation, and big innovation beyond telecoms. Bell Labs was the answer.

We're seeing conditionality for the first time with COVID, where in some countries the COVID recovery funds are conditional on companies transforming themselves. In France the recovery funds that went to both automotives and aerospace were conditional on those companies committing to reducing their carbon emissions. In Austria and Denmark, companies are having to commit to not using tax havens in order to access the recovery funds. Those conditionalities are part of the way to make sure that companies that are benefiting from public subsidies, investments, guarantees are part of the solution and not part of the problem.

Coming to your concrete question, you could argue, because we would have to have very detailed policies, it’s not just cut and paste across all sorts of different instruments. But with grants, for example, coming back to Google's algorithm funded by the NSF, you could think that maybe—I don't know, I'm not a lawyer—you could put into the contract, “Here's some money, Sergey Brin or whoever. It's yours. It's a grant. If it fails, don't worry. That’s why we're funding you. We want to stimulate innovation, experimentation, so on. But a clause: if this algorithm ends up allowing you in a company built on a patent from this to make x billion in a certain amount of years, a percentage of those profits will go back into a public innovation fund.” Why not? I'm just putting this out there. Surely it can be framed in a more intelligent way, but why not?

The guaranteed loans going to companies, which is different from basic R&D, which is a grant, but the guaranteed loans like the Tesla ones and the Solyndra ones, are where you might introduce the notion of equity stakes. These are downstream investments, not the upstream ones, where you hope that there's lots of knowledge spillovers. The downstream ones are going to particular companies to do particular things. But this assumption that the government, by putting in money in R&D is going to create this great public good, it's simply not true if you're then not governing that process. So for example, governing intellectual property rights in a particular way. Because a patent is a contract, right? The government gives a company twenty years of monopoly power. What does the government get back? It gets back what it didn't have in the Middle Ages, where it was all just secrecy. In other words, when the patent is up, because it's been written down—literally, that's what a patent does, it writes down that kind of secret—then the patent is no longer there after twenty years, so there's more diffusion and knowledge spillovers in the economy. But if in the meantime the patents have been allowed to be abused, they become part of the problem. The government doesn't get back its return in that deal.

It’s a contract. I don't like the word intellectual property rights — it makes it sound like it's a god-given right. No, it’s a contract. There's a deal. How do you make that deal is a good deal and a symbiotic deal and not a parasitic one?

YANCEY: One thing I really appreciated in the book is you see a lot of people expressing pessimism about the future—these kids are so narcissistic, there's all this individualism, etc. But you sound more optimistic. Whereas voter participation rates in the US were declining in the past, they’re up now. There's increased civic engagement. There's protest movements, like the ones that you've mentioned. You can feel it. There's a different kind of spirit out there, even before COVID. Do you think that we're moving into something after classic 20th-Century individualism? Is something happening because of the network? Even thinking about your kids is there some change in how we are relating?

MARIANA: I think so. I have four kids and they're so much more aware than I was at their age about all sorts of issues around inequality, race. The whole question of tolerance, a more tolerant society, they're very aware of it. I sometimes say things that they'll say I'm just completely unaware of the things I should be saying, thinking, or doing, and they make me feel quite foolish. But that itself isn't enough, right? So that's where you can get condescension, where we can be like, “Oh, isn't it cute? My teenagers know everything about climate change.” Greta gets patted on the head at Davos or wherever. In the same way that essential workers get clapped on a Thursday. It's actually offensive. But I find the missions concept really hopeful. A positive concept, which is, “What would it mean to actually bring those teenagers that have become really sensitive, for example, to climate change or to Black Lives Matter, to the table when we talk about what needs to be done?” in that co-design, co-creation way.

I often remind people that the reason teenagers—and even young kids, toddlers—know about one global mission, a plastic-free ocean, is not because an academic like myself, a great business leader like yourself, or a great minister talked about it, and went into a classroom. They know about it because there was this amazing documentary made by David Attenborough called Blue Planet. And that last episode of Blue Planet had all these baby dolphins choking and dying of plastic in their digestive system. That really resonated. It spoke to them. There's something about, what does it mean to bring the full power of the creative sector—and by that I also mean poetry, if we think of Biden’s inauguration, where that amazing poet just made everyone just stop. So broadening out what we even mean when we're talking about inspirational moonshots. It's not even just the STEM subjects (science, technology, engineering, maths), but also poetry and the humanities and making people feel again, dream again.

I have an interesting story: I ran a commission for the UK Government doing mission-oriented industrial strategy, and I have really great commissioners. I invited Brian Eno, a famous music producer, to one of the meetings, because he's on my board of the Institute. At one point, he's like, “Hold on a second. On the one hand,” he said, “You guys are incredibly inspirational, you're talking about things that are fantastically relevant.” But he said, “But you're sometimes making assumptions. Why do you always assume that people want to get from point A to point B quicker? What if they actually want to go slower and experience life, and have the time to live in a different way?” So one could say, “Okay, fine, whatever. Actually people really need to get places quickly and congested traffic is terrible.” But how we reimagine with musicians, with poets, with the full breadth of the humanities tackling and thinking about these problems differently, that’s also part of that co-creation and co-design. It's not just about citizen movements and trade unions, as I was talking about before. Academia itself has become a bit too focused on some subjects, and we're under-financing the humanities. You'll have lots of physics and mathematics and economics departments doing just fine. We think, “That's because that's good for the economy.” And yet if the inspiration has to come from this broader set of voices, we also need to be asking ourselves, “What does that mean for opening our ears to other ways of thinking about the world?”

YANCEY: I was talking to the journalist David Wallace Wells yesterday, author of The Uninhabitable Earth. I mentioned that I was talking to you, and he had a great question. He was curious about your thoughts on the new dogma of central banks, and what it would take for central banks to embrace climate change as a mission.

MARIANA: That’s sort of happening. In Europe, at least, the European Central Bank and the European Investment Bank are having an increasing number of conversations about climate finance. Also making sure that, especially in a moment like the pandemic, or previously with the financial crisis, we don't just flood the system with liquidity. Which is what happened with the financial crisis, most of that money just went back into the financial sector. It didn't actually resolve the problems on the ground. So this much-needed coordination between injection of money and then the actual structures and real economy that need that money, but also the direction to foster a green transition, I think those conversations are very much there.

The need to have an independent central bank of course is always the pushback. “No, what you need is directed fiscal policy, fine. But you can't have a central bank directing where the money goes.” But they do direct it in the end. There’s particular places where this increased liquidity goes. Even just making that much more visible, transparent, and having metrics that are mandatory for different banks and investors to reach as opposed to the voluntary ESG kinds of metrics. That's one of the main ways to get a financial system—broadly defined, not just central banks—where finance is being directed towards areas that truly are sustainable, and that we have standardized, transparent, mandatory metrics in order to capture that sustainability or not sustainability. That itself would go a long way. I think Mark Carney with the Bank of England has been very important for those discussions.

YANCEY: The stimulus ten years ago in the US was $700 billion and the most controversial thing ever. Now we have $6 trillion in stimulus, I believe, in the past year in the US alone, and there's a small amount of grumbling, but not much. And I feel like your ideas are being embraced. The ones that compelled to write your book. What's different now? Why is that happening? And will this last long enough to do the things that we need to do?

MARIANA: In one of the chapters where I talk about outcomes-based financing, I recall one of the main points of modern monetary theory. My friend Stephanie Kelton, who’s also on my board, is one of the key advocates of that. The key point is so right, which is: when we go to war, no one says, “Oh, we don't have enough money.” Money literally comes out of the woodwork. Right? Has anyone ever said, “Oh, we can't go to Afghanistan, oh, we can't go to Korea, we can't fight World War II, because there's not enough tax revenue.” Money is created. Right? The problem is that it’s also created when you have a financial crisis, when we have COVID, and the kind of recovery schemes that we need now. But often, that's too late. You actually have to wait for the war to arrive, for climate change to get to the point that it is getting—and it hasn't even gotten to that, we're not spending the trillions on climate change yet. We are with the COVID recovery scheme—all of a sudden, you're putting in a lot of money, but it's too late. What does it mean to be creating that money in such a way that you are preventing these crises, or making our social fabric more resilient, our systems less unequal? Because of course, with COVID, we know that the people who've been affected the most are those also who've been suffering the most in terms of increased inequality. So why don't we create funds to solve those problems along the way, precisely so then you don't have to put in the trillions all of a sudden overnight? Which potentially is—I don’t want to say a waste of money, I believe that we should have even bolder stimulus packages. But it becomes very hard to do it in a strategic, structured way if it's too little too late.

What we really need is a different idea of where money comes from. What is the real constraint in the government's budget? The whole fear of inflation, for example, doesn't make any sense if you are operating at under-capacity. When you have the levels of unemployment we do, or underutilized resources, or wrongly utilized resources. So a major transformation of those resources can expand the pie, because you're transforming the system in a new direction. There's no reason you should have inflation. You have inflation when an economy is stagnant and you're not increasing its potential growth rate, and then you just inject a lot of money. You literally have an existing amount of goods and services with a lot of new money sticking on it, that will increase inflation. But if you're expanding the pie, you won't.

But the problem is if we're just expanding in this unsustainable way that kills the planet, then that's a whole other problem. Inflation is a minor problem if we’re no longer going to have a sustainable planet. The COVID recovery trillions remind us that when we actually care, and when we realize, “We've got to act now because lives are on the line and jobs,” then we actually do come in. But unless it's part of a new way of thinking of what government is for, what the constraints are, and what public finance is, then it doesn't create a real shift. We're just going to go back to normal later. Wait for the next crisis and once again put in the trillions without having actually changed the underlying structure.

YANCEY: There was a great tweet triptych of you and Kate Raworth and Stephanie Kelton holding each other's books. The three of you have pushed the consensus on economics, the purpose of the state, assumptions about money in huge ways. I'd say Carlota Perez and Elizabeth Anderson are also two people who changed that. So why are your ideas connecting to this moment?

MARIANA: Stephanie [Kelton] and I once joked around about—you how the Financial Times has this magazine that's called How to Spend It? We said, “Well, we should write that. It'll be like, ‘Stephanie will tell you where money comes from, and Mariana will tell you what missions and purpose to spend it on.’ We’ll be the editors of that magazine, how and what to spend on.” And of course Kate's [Raworth] work has been really important for making this notion of the circular economy something very visual, that wonderful Doughnut she has, which is about how do we think about the regenerative potential of the economy, but also humans, as needing to regenerate their own ability to prosper. I think they're important, these three ideas, and these three different ways in some ways of saying similar things, but with different focuses. Because our system is so not going in that direction. We continue, even now, where we're putting all this money in, and we're already hearing about the need to share the burden to cut public spending later. The idea of austerity and governments being seen as the same thing as a family household that has to be living within its means, all that kind of problematic notion—because it's theoretically unfounded, which we always realize when it's too late—that’s still there. This idea that, at best, we should just be putting a lot of money into infrastructure because interest rates are low, that's still there. And the idea that actually all the wealth creation is in business, and at best we can talk about stakeholder value as a way to feel good because you're sharing your great, individually created wealth in a better way, that’s still there. There's no proper collective value creation. To create change, we need the battle to be a triptych one, in that way that you just said.

By the way, that photo came about one evening—I think I was eating ice cream or something with the kids—and Kate sent me and Stephanie a WhatsApp, and we had never been on WhatsApp together, saying, “Hey, guys, I just got a great idea. Can you please go take a picture of yourself with the other two’s books?” And luckily we had those books. There was this assumption that we'd all have each other's books, we did. And then we all have to have our kids take these photos, because it's quite difficult to sit there. So my kids are like, “No, you don't look good. Go back.” And then it was done in ten minutes. And then it became a great little Twitter whatever. What are they called? Not meme. Twitter…something. [laughs] B the way, you know what I liked about that? Women supporting women and showing each other's work. We weren't holding our own book, but each other’s—I thought there was something really special there. Because unfortunately, definitely in academia, that's not how—everyone’s worried about their own citation.

YANCEY: That’s a great point. I don't know if three men would have done that.

If I could squeeze in just one last thing. If I have this correct: you write about how much money Deloitte and the big consulting firms make from government and the ways the government has outsourced its work. But it's my understanding that you don't get paid for the work that you do with governments. Is that true?

MARIANA: I've been criticizing the large consulting companies for a process that I've been witnessing, which is the reduction in government's own investment in their capabilities. That infantilization that Lord Agnew talks about of the public sector is a really interesting way to put the problem. It’s what then my advice to governments is focused on.

A lot of my work is free. Almost all the advisory councils I'm on are free. I'm an adviser. I was a special adviser to the Italian Prime Minister, to the South African President, to the Scottish First Minister. That's free.

When I bring my Institute to the table, we need to fund the work. The postdocs, the PhD students that will be part of a team that over a two-year period will work hand-in-hand with the civil servants—we have contracts that basically cover the costs of a postdoc. So for example, for the two-year work we did in Scotland, the cost charged mainly covered my collaborator, who was a research fellow, to do the work. It's basically at cost.

I am on the speaker circuit. I am an academic on an academic salary with an artist husband and four kids in a very expensive European city. I do need to make extra money, and I tend to do that more in talking about my work. It's nice to be paid to talk about ideas, but that's not really consulting. That's after-dinner talk payments. [laughs]

It's also what you're charging. If people are charging governments, I don't think that's necessarily a bad thing. It would be wrong to think that an academic is just going to go around doing free work. The problem with consulting companies is the amount that they're charging. It's extraordinary, in terms of the billions often being siphoned out of government budgets—but even there, it would be okay, actually, if that was accompanied by an intra-governmental investment, which over time weaned you off of that need to get the consulting companies to, for example, do project management. So I don't actually blame the consulting companies, I blame governments for becoming addicted to them. There's a big debate happening now in Italy with Mario Draghi, who's brought in McKinsey to basically project manage the recovery. Now, if that's because in the meantime, the Italian Civil Service has become decimated, then maybe he has no choice. But if that's a process of increasing the decimation of the Italian Civil Service, that's the problem. And I think unfortunately, that's where we are. It’s over-consulted.

YANCEY: You’ve been so generous with your time, Mariana. I so appreciate it. And the book is great and your mission is as important as any in the world, and I continue to wish you success.

MARIANA: Thank you so much, Yancey. We’ll have to find something to collaborate on in the future. Especially in that forest behind your house!

YANCEY: Definitely. Thanks again.