Global Competitiveness Forum

Remarks by Ronald J. Daniels, President, Johns Hopkins University
Global Competitiveness Forum
Riyadh, Saudi Arabia
As prepared

I am pleased and honored to be here in such great company for the Global Competitiveness Forum, and grateful to our conference hosts for the opportunity to speak to you this morning.

I know that the focus of this conference is by definition global in nature, but allow me to make the global local for a moment. I want to start in Johns Hopkins’ hometown of Baltimore.

I’d like to take you on a quick tour of a factory building there called the Tindeco Factory. This former warehouse space was opened in 1914, and was home to the Tin Decorating Company. It was, at one time, the largest plant of its kind in the world, producing millions of tin containers a day and employing thousands of skilled workers. And the company was not alone in its manufacturing success. Along with such American manufacturers as Bethlehem Steel, General Motors and Westinghouse, it helped secured Baltimore’s status as a leading manufacturing hub with a peak population of nearly 1 million people.

Unfortunately, starting in the 1950s, Baltimore began to decline. International competition caused our leading manufacturers to shutter their factories, and we experienced wrenching job losses. The city lost more than 300,000 residents. And in the wake of this industrial decline, our population, particularly African American citizens, saw marked reductions in their quality of life, level of education, and social stability.

Today, Baltimore is a city with many strengths, including its leading universities, health systems and private firms. Johns Hopkins University and its Health System employ more than 35,000 people in Baltimore. We are the largest private employer in the city and state. We are joined by great firms like fund giant T. Rowe Price and sports apparel firm Under Armour.

But as the world saw so vividly this past spring during the unrest following the death of Freddie Gray, we have not yet restored the prosperity and social stability that our city enjoyed more than a half century ago.

And so the question that I am preoccupied with is: How do we create a diverse economy in which each of our city’s residents can enjoy the fruits of the twenty-first century economy: jobs, health, education and social stability?

And what role can a university and health system like ours play in the city’s revival?

It’s against this backdrop that I recently visited a dramatically transformed Tindeco Factory. Its vast manufacturing spaces are now the headquarters of Personal Genome Diagnostics, or PGDX.
The company is the brainchild of two extraordinary Hopkins doctors, Victor Velculescu and Luis Diaz. Based on research done at Hopkins, the company has created new, non-invasive techniques – including blood-test based biopsies – that can detect and diagnose cancer tumors at very early stages, well before they can be seen through standard imaging techniques. These physician-scientists are, simply put, leading us into a new era in cancer medicine, revolutionizing how we diagnose, monitor and treat cancer.

PGDX is one of a growing group of Hopkins related start-ups that have decided to stay – in Baltimore. Now with 63 employees, they are recruiting students from Hopkins and other great national universities, bringing to our city the best and the brightest that big data science has to offer. Fresh off raising 21 million in venture capital funding, they are committed to Baltimore.

And for a city like ours, and indeed for a country like Saudi Arabia, both looking to promote innovation industry, decisions like this reinforce the sense that it is not a fanciful aspiration.

What I’d like to do today is talk about the components of a fertile innovation ecosystem – focusing particularly on the role of the research university within that mix.

In thinking about the prospects of building such innovation ecosystems, place matters.

Economist Enrico Moretti argues for the role of cities as critical sites for innovation. This is because of the benefits from densely concentrated clusters of innovation activity. In fact, Moretti describes how for every one job in the knowledge economy, five more are created in the geographic area – not just in innovation industries, but in other less technically advanced fields in the service industry.

Further, these clusters tend to be tied closely to strong research universities. Take the United States — MIT, Harvard in Cambridge; and Stanford, Berkeley, UCSF in the Bay area.
In fact, it has been claimed that close to 80% of new industries in the United States emerged from technologies developed in American research universities. And this is not just about the work of faculty members. Their students are often the critical catalysts for innovation. Sergey Brin and Larry Page were graduate students when the idea behind Google took shape. Mark Zuckerberg may not have graduated from Harvard, but the idea for Facebook was born there.

Yet, the reality is that a robust innovation ecosystem does not simply follow from the presence of a great research university. We wish it were as easy as: Start a great university and…next thing you know you are in a driverless car heading to Google’s sprawling campus. But sadly it is not.

And I know that from my own experience at Johns Hopkins.

Johns Hopkins is widely recognized as America’s first research university. Today it has several internationally distinguished schools and programs in medicine, nursing, public health, international studies, and biomedical engineering, to name a few. Its hospital has long been recognized as the best in the country. We have a large international footprint. Indeed, one of our most important international ventures involves an innovative and ambitious collaboration with Aramco in which we are honored to be co-managing the health care of approximately 360,000 employees. And, for this discussion, perhaps most significantly, for each of the last 35 years, Johns Hopkins has been the largest recipient of competitive research funding allocated by the US government.

But for all of these strengths, we have ranked behind many of our peers in our translation of our research activities into licensing and marketable technologies. A lost opportunity not only for us, for our broader societal impact, but also for the city we call home.

Today, we are changing this situation. And we are acutely aware of the lessons of other cities in and outside of the United States that are ahead of us in creating a robust innovation ecosystem.

Specifically, we see four key ingredients of a successful innovation cluster.

Let me address each in turn.

First: the research university. I have already noted the intimate association between research universities and innovation clusters. But why is this so? Simply, successful innovation is fueled by the kinds of cutting-edge research that are the lifeblood of any great university. Through rigorous scholarship, new approaches to every day problems can be identified.

It seems that applied research is where the most visible immediate contributions to innovative industry are made. Yet it is my view that the universities having had the greatest impact on innovation give pride of place to basic, curiosity-driven research that is not directed at any obvious translation opportunity. This may seem paradoxical. But the truly inspired applied researchers are typically those who engage in basic research as well, and who will want to work in an environment that values this activity. Indeed, it turns out that many of the discoveries that have had the greatest effect on industrial innovation were spawned by insights taken from basic research – from GPS and lasers to antibiotics and magnetic resonance imaging technology.

At the same time, a university must be a place that supports and nurtures the entrepreneurial spirit of its faculty, students and staff. This requires deliberate effort. It requires the right incentives, the right policies, the right space and resources to cultivate this activity. And even more than that, it requires an outward gaze, the entire university working together to develop partnerships with existing companies and to engage other public and private stakeholders outside the university who are key to the development of new companies.

This is something that we have paid close attention to at Hopkins. In recent years, we have launched what we call Johns Hopkins Tech Ventures, a one-stop shop for entrepreneurship and innovation across our institution. Under the leadership of a serial entrepreneur with a proven track record, Johns Hopkins Tech Ventures has launched on-campus specialized facilities designed to incubate start-ups that have emerged from Hopkins and from across our city. They have created a mentors-in-residence program and have raised seed funding for translational work.

We are also supporting our students in this arena, in and out of the classroom – and the students are responding. Fully 25 percent of our undergraduate students study entrepreneurship in some form. With alumni backing, a group of enterprising undergrads are continuing to develop a wearable diagnostic device that could win them the $10 million Tricorder XPRIZE. And, in a weekend-long design competition, our graduate students helped create a new protective suit that is now being mass-produced for workers fighting Ebola.

This is all to say that the university must play a deliberate role in implanting and sustaining the entrepreneurial mindset in its community.

Finally, and perhaps most importantly, dynamic universities that successfully anchor innovation clusters embrace the value of academic freedom – the ability to ask hard questions, to challenge existing orthodoxies, to be a place where independent and high-risk, high-reward experimentation can truly take root.

They further allow and create opportunity for interdisciplinary contact and commingling. Now, beyond the university, let’s briefly take a look at the other elements that make for a robust innovation environment.

The second ingredient is a strong national commitment to high and sustained levels of public funding for university-based research.

It has long been recognized that the genius, if I can call it that, of the American system of innovation derives from the role played by the federal government in funding research through the National Science Foundation, the National Institutes of Health and other agencies. The U.S. government spends well over $130 billion each year on research and development. This amounts to between 0.75 and 1.0 percent of the country’s GDP. The National Institutes of Health, the principal agency responsible for biomedical and health-related research, alone has an annual budget in excess of $30 billion, most of which is awarded through competitive grants to individuals at research universities and other research institutes.

However, it’s not just the quantum of public research investment that matters, but the way in which that funding is disbursed. Instead of being locked into static long-term investments to universities that may not reflect the quality of the institution, the NIH and NSF allocate most of their funds competitively and on a time-limited basis to the most deserving people and projects. That way, people and ideas can leave institutions that are not supporting their success. Further, this merit-driven mode of allocation avoids the political favoritism, misallocated resources and bureaucratic rigidity that is at odds with the ferment of scientific innovation.

Now, the third ingredient in the mix is the legal and cultural framework in which research universities operate.

In the absence of credible and strong intellectual property protections, individuals and institutions will decline to invest in the creation of this property. In 1980 the Bayh-Dole Act revolutionized American industrial innovation. That legislation provided for university ownership of inventions created with federal research funding. Previously, the federal government retained title to these inventions, and private firms could not exploit the research without endless negotiations with the federal bureaucracy. But it is more than just ownership of intellectual property. As Stanford sociologist Woody Powell and colleagues have observed, you also need to create the conditions — legal and cultural — that allow the circulation of that intellectual property, and indeed the circulation of people and mindsets — across institutions and sectors in the innovation ecosystem.

As a final ingredient, successful innovation centers are marked by their capacity to attract the diverse people and organizations that make translation easier – the venture capitalists, specialized lawyers, marketing and management consultants, seasoned (and senior) entrepreneurs, and others, including non-profit and state funders, that help guide ideas from the lab bench to market.

And there is little doubt that in a world in which these individuals face a dizzying, virtually unlimited array of opportunities to ply their craft, policy-makers need to worry about the quality of the community in which this activity takes place. Are there good schools? A vibrant arts and cultural scene? Parks and other recreational features that can attract and retain talent in a competitive landscape?

Over the last day, I have been struck by the efforts that the Kingdom is making to foster its innovative potential.

Through your National Science, Technology and Innovation Plan, you are investing extraordinary resources in new universities, science incubators, industrial parks, research funding, and other initiatives that are already yielding a dramatic improvement in research and patent activity only several years in. And I am particularly intrigued by the experiment that is KAUST.

And it is here our story comes full circle.

Back to the halls of PGDX, that company in the old can factory I mentioned at the start of my remarks. As I sat with the two founding executives, I listened raptly to their hopes and plans for the future. I was moved by their commitment to doing the hard work to transform this successful, but small-scale service provider into a larger, products-oriented company with the potential to reach thousands of cancer patients worldwide. I was heartened by their determination to take the company from 63 employees to more than double that number in two years.

And I asked them, what would help them do it?

Their answer spoke to the unique, multifaceted brew that bolsters a young company’s success: they wanted assurances that the streets are safe for their young employees to walk home after working at the computer until past midnight; they mentioned access to quality child care as a recruitment tool for top executives; and great restaurants and cafes for the neighborhood surrounding their offices. In their comments, they underscored the complex interplay of quality of life factors that attract and retain talent. Factors that are often missed by a single-minded focus on translating technologies or creating investment funds, intellectual property policies, and tax incentives.

Of course, it went unspoken that the keystone of this innovation matrix was the research university – the igniter of ideas, the place where individual promise is nurtured, but, for our discussions today, the institution, that more than any other, can unlock the many possibilities for our cities, nations and global community.

Thank you, once again, for affording me the opportunity to participate in this very important and consequential discussion.