Carl Schramm

Sustaining Entrepreneurial Capitalism

The conventional wisdom is that the surge in productivity growth which has surged in the United States over the past 15 years has been attributed almost wholly to advances in the production and use of information technology. While this is certainly evident from the statistics, a driving force behind the IT revolution has been the development and growth of new firms. Indeed, the U.S. economy has achieved a remarkable transformation over the last several decades from an economy characterized by large, bureaucratic firms into one increasingly powered by entrepreneurial innovation. The challenge ahead therefore is to cement and strengthen the entrepreneurial form of capitalism. In this paper, we provide a framework for policymaking to achieve this objective.

Toward an Entrepreneurial Society: Why Measurement Matters

It is better to travel an illuminated path toward future economic progress than to stumble in an unlit direction. Measuring innovation is central to understanding economies everywhere as they evolve and adapt in the face of globalization. Improvements to our measurement of innovation will help to ensure sustained economic strength and improvements in human well-being.Decades of disappointing development will not be reversed unless indicators of societal advancement keep pace with changes in the way society functions. For emerging economies as well as established ones, national income accounts developed three generations ago to measure macroeconomic performance need to be complemented by “national opportunity accounts” tracking the leading indicators of change in the 21st century.To be sure, updated approaches to measurement will not create an entrepreneurial society. However, measurement is a first step toward accountability, which in turn is an essential element of good government. Countries that — whether through private initiative or government action — create conditions favorable to entrepreneurship merit the recognition that can come with appropriate measurement. Where opportunity is present and widely perceived, investment and future growth may then follow naturally.Past experience indicates that movement toward an entrepreneurial society will have profound and lasting effects that go beyond economics. As individuals step into the market, assume risk, and work to turn their aspirations into businesses, they will insist on political as well as economic liberalization. In this manner the expansion of entrepreneurship is linked to the development of freedoms. Ironically, entrepreneurs, who are by nature agents of change, may prove in the coming century to be among the most important forces of global stability.For those who worry about questions related to expanding human welfare through technical change and economic growth, the systematic measurement of innovation and its impact is, for all of the reasons sketched above, arguably the most important social science challenge of our times. Without effective measurement and assessment, poor decisions will follow. This is no small matter. As Lawrence Summers has observed in the pages of this journal, “It is a tragedy — it is, in a sense, killing people — when resources are poorly allocated.”If history has any global lessons, one is that valuable public resources that are taken for granted soon become scarce or disappear. The institutions that underlie the prosperous economic system we all share — what I have referred to as “entrepreneurial capitalism” — are no different. Accountability for the future means accounting for the present.

Valuing Health Care: Improving Productivity and Quality

This report addresses a deceptively simple question: How can the productivity of American health care be substantially improved? Productivity, in lay terms, is the ratio of output to inputs. A more colloquial rendition of the question might be: how can we get a lot more bang for our health care buck?By design, we have brought together a varied assortment of ideas and suggestions, illustrating the messy, grab-bag nature that effective changes often need to take. Yet our proposals do fall (albeit with some overlap) into four broad categories, which structure the recommendations section of this report.Harnessing information: how systematically gathering and sharing data can unlock knowledge that produces systematically better choices. The key here is to incentivize a new corps of data entrepreneurs to collect and analyze existing medical data to discover and then disseminate the use of new therapies.Improving research: encouraging more collaboration across institutions and funding more translational research (aimed at “translating” basic scientific discoveries into medicines and therapies). Legal and regulatory reform: modernizing medical malpractice systems, removing counter-productive restrictions on health insurance premiums, and streamlining new drug approvals.Empowering patients: there are large benefits of giving more power to the people who matter most — patients — to make informed decisions about their own care.The ideas here are not new, though many of them are familiar only to the cognoscenti. To the contrary, we have sought ideas that have showed promise in the field, and then attempted to set them in a context that exploits the adjacent possible.If this report can focus more minds in the health policy community and general public on finding and implementing those changes, in everything from clinical practices to regulatory structures, it will have succeeded.From the Kauffman Task Force on Cost-Effective Health Care Innovation.

University Entrepreneurship May Be Failing Its Market Test

of industry “best practices” to improve the performance of any organization, including how to improve the innovative capacity of a profit-seeking firm. For the uninitiated, this concept is as simple as its name suggests. To improve your company’s performance, you look for the organization that does something better than everyone else and then copy it. If Procter & Gamble runs its packing line better than you do, by all means, copy its practice. Such thinking may be a reason we are concerned about the slowing rate of innovation in America. If today’s best practice is the standard for emulating, do any firms feel comfortable out on some “better than best” frontier? The very notion of “best practices” suggests the acceptance of a grand average. Except, of course, for those firms that are deemed the best practitioners of “innovation.” In a recent book, Inside Real Innovation, Gene Fitzgerald and Andreas Wankerl and I argue that most older and larger firms forget how to innovate, a finding suggested long ago by Max Weber. Perhaps this is why we have, over the last three decades, intuitively embraced entrepreneurship as a way to bring more innovation to our economy. Indeed, as I have detailed elsewhere, it was the resurgence of entrepreneurial capitalism in the 1980s that got us out of the prolonged recession that characterized the Carter years. But the word “entrepreneurship” is beginning to sound a little like the concept of best practices—a phrase that is valued for its inchoate sense of being logical and a self-evidently valuable pursuit. What we mean when we speak of entrepreneurship appears to evade definition. Of course, entrepreneurship is connected to creating new profit-seeking firms. That’s what might be called the conventional or