In this podcast, Prof Jaideep Prabhu takes listeners through his fascinating journey as a business school professor who started by studying innovation in the private sector, went on to discover exciting initiatives in the government, and explored what’s happening beneath the hood. The lessons that he has distilled in this conversation are valuable, not only for those working in the public sector, but also those in large corporations and startups.
8 Quotes that capture his key learnings
“I became aware of a whole range of organizations, small to very large, that were driven by other concerns. They were not profit driven. They were driven by solving social problems like inequality, or access to health care, education, etc. But they were using tools of business.”
“Large organizations, regardless of whether they are in the private or public sector, have the same set of constraints. But they also have the same set of opportunities.”
“I think citizens wherever they are, are in a curious situation, because they are now dependent on digital technologies and digital services coming from both the private sector and the public sector. And that data is being harvested and being used.”
“First we have to think about the problem we're trying to solve, then think about what are the relevant technologies, so it can be technology not for the sake of technology; it’s technology pressed in the service of solving problems for people.”
“In the private sector, innovators are like magpies. They steal from everywhere. I think in government, we should be the same thing. We should have bureaucrats who are eager to learn from other countries from other contexts, but they should apply with caution.”
“I'm a big believer in tools. These ideas are our tools. One might be like a screwdriver, one might be like a hammer, one might be like that drill, one might be like a nut, like a bolt. These are tools you need to have in your toolkit. And there’ll be a time when you need the screwdriver for a certain purpose, and you don't want to use a hammer at that time. At another time, you might want a hammer.”
“We need a new type of person in government, somebody who is an innovator who may have worked in the private sector, knows the mindset of the private sector very well, and then comes into government to regulate, to ensure that we get the best for the private sector, but not at the expense of the ordinary citizen.”
“If you really care about how your government should be, perhaps the best thing you can do is to go and work in the government. And you can do that as a politician at any level. But I think more importantly, you could do it as a bureaucrat, as a civil servant.”
People, projects and ideas explored in the podcast
- BRAC, Bangladesh
- Aadhaar, India
- Nudge, UK
- Randomised Control Trials
- Mariana Mazzucato
- Lateral hiring in government
- Exponential technologies
- Technology regulation
- Data protection
- Frugal Innovation
Resources from FF
Here are five stories from Founding Fuel archives that can provide a deeper understanding of the issues that Prabhu discusses in the podcast
Working with the government
What happens when people from the public and private sector come together? Conventional wisdom has it that it is difficult for them to work closely. Most evidence points to just that. Why ought somebody from the private sector give up all the trappings and perks to get into public office? And why should somebody who has spent a long part of their working lives in government, make way for somebody with no experience in the government?
Charles Assisi interviews Ashok Pal Singh: “Five years is good to put skin in the game”
The debates around Aadhaar
How should you think of Aadhaar? What are the issues at stake?
Haresh Chawla answers: The thinking Indian’s guide to Aadhaar
Discussions on Aadhaar often descend into shouting matches. What’s the way out?
NS Ramnath’s perspective: The Aadhaar debate: Is common ground possible?
Managing public health
The public debate around the Gorakhpur tragedy in 2017 highlighted the fact that India hasn’t been able to root out vector-borne diseases for centuries. What exactly is the issue?
Indrajit Gupta answers: Gorakhpur tragedy: Why we haven’t been able to win the war against mosquitos
No single entity can solve Covid-19. So, a diverse group of individuals and institutions came together to launch telemedicine app Swasth. But can it develop into a public utility, providing quality healthcare to citizens?
Nachiket Mor talks about an important initiative: A platform approach to bridging India’s healthcare gap
As a journalist who has covered business, and who also happened to cover a little bit of government, one of the things that I found interesting is the difference between how private businesses work and how government works. And also the way people look at the government compared to the way they look at the private sector. You have extensively studied how innovation works in the private sector, and then shifted your lens to the government. Did that change the way you look at innovation itself?
Yes, it’s a wonderful question. It actually gets to the heart of not only this book, but my past books, and my career, particularly over the last 10 years or so. And so as a business school professor, I’ve studied businesses, I’ve studied a lot of Western companies in areas like pharmaceutical and biotechnology, banking, things like that. That was the first part of my career. And then I became interested in emerging economies like India, where I’ve grown up and then I became very interested in not just large multinationals, but also domestic companies in countries like India or China, African economies and Latin America.
So I became aware of a wider range of organizations and motives in which innovation was happening, not just in a corporate environment, where innovation is very much in the service of profits and shareholder wealth. It’s very much about generating new products and services or processes that give you a competitive advantage.
I became aware of a whole range of organizations, small to very large, that were driven by other concerns. They were not profit driven. They were driven by solving social problems like inequality, or access to health care, education, etc. But they were using tools of business. And so I saw the parallels immediately how they were organizing for innovation, how they were creating a culture of innovation, how they were motivating people to innovate.
The evolution of BRAC
In fact, the most interesting experience for me was when I first went to Bangladesh in 2012, and came to know, very closely, a very large NGO, probably the world's largest NGO, BRAC, where they have applied many of the principles that you would see in large companies to addressing various systemic problems in their society from the grassroots up—problems of health, primarily started with health, where in the 70s, there were very high rates of infant mortality and maternal mortality in that country. Often children were dying of dehydration from diarrhea and dysentery. The solution actually had been developed—a very frugal, inexpensive, ingenious solution had been developed—in Bangladesh itself.
So that’s where BRAC came in to solve a very specific problem. And over the years, it developed an ingenious methodology and approach which I would consider very major social innovation, business model innovation, healthcare innovation, where particularly they identified women from villages who they would train to make this oral rehydration solution. Then those women would train mothers in the village communities. BRAC would then monitor and collect the data on this and evaluate.
Over time, they created an army of these health volunteers in villages across Bangladesh, who would not only train mothers with things like oral rehydration, but then over time, they became local health volunteers, like we have in India, Asha [Accredited Social Health Activist] workers.
I became very interested in these other types of organizations doing innovation. And in some ways that is a bit like the state. What BRAC is doing in Bangladesh, you could argue, is like what a state would be expected to do—primary health, primary education, micro finance, social enterprise, and not just in a few villages or small districts but the whole country. And they were doing it very efficiently, very effectively, very frugally, applying some of the best principles that we teach in business schools about human resource management, financial management, and database management. Even more impressively, it was a learning organization trying out new ideas, testing them, often with academics in a very rigorous way and then thinking, “Shall we scale this? Can it scale? Or should we drop these programmes?”
That is my trajectory, where I started by looking at the big corporation thinking that's the only place where innovation happens. And then realize, actually, innovation is a very broad phenomenon. It happens in all kinds of organizations, including in the public sector, and including in the state. So that's how I got to it.
The public and the private sector
Now, the other part of your question is, what are the similarities and differences, and I find those endlessly fascinating. Over time, I’ve realized there are some very interesting similarities, and some very interesting differences. I see it as a continuum. I don’t see it as a radical break, that really, they are qualitatively different.
But the instincts of people, particularly those who work in the government, is to at least initially state that they are very different. And that things that apply in the private sector simply do not apply to the state sector. That is a lazy kind of defensive strategy to take, or at least, it’s one that when you analyze a little bit more carefully, turns out not to be the case. I have done training programmes for senior Indian civil servants for several years. And of course, these are extremely bright people. They are extremely experienced people. They are also very thoughtful people, they read a lot, they think a lot and they are articulate. Whenever I would do a session on innovation, and present them with examples from the private sector, they would immediately say, “Oh, but that’s the private sector, they can do things that we cannot do.” And I will try to dig deeper and ask them, what do you mean by that? They’ll say, “Oh, you know, we are very bureaucratic, we have a lot of processes, we have a lot of controls, we are, you know, accountable to so many people.” And then I would point out to them, that is also the case with large companies, large companies are also very bureaucratic, they are also very hierarchical. People are also accountable to many different groups, like customers, employers, shareholders, society, regulators.
And so, the big organization, whether it’s in the private sector, the public sector, actually looks remarkably similar. Then they would say, “Oh, you know, we cannot take risk and experiment, because if we fail, then that’s the end of our careers, we will be hauled up in front of ministers or in Parliament or in the press.” And, that may be true, it may be quite extreme, what happens in terms of failure, but failure is not exactly tolerated in a corporation either. There are serious consequences for you, if you fail. You will be hauled up in front of your bosses, you could be hauled up in front of shareholders, during conference calls, you could be liable in the press, and of course, even in a court of law. So, that risk aversion, you see in both the private sector and the public sector in large companies, you see the slowness with which things happen. There is a kind of inertia in any large organization. So I actually think that large organizations, regardless of whether they are in the private or public sector, have the same set of constraints.
But they also have the same set of opportunities, which is resources. So, some multinational companies today are bigger than countries put together. Their profits and their revenue streams are bigger than the GDP of countries. They operate across countries. Sometimes they are not even beholden to any or accountable to any national parliament or government. They’re extremely powerful and have lots of resources that can help them do all kinds of things.
Many governments are equally powerful in any particular country. The government is sovereign. It has enormous resources. They can even print money if needed. They can borrow money, spend, pass legislation to do things. And they can use their influence on society to get people to volunteer to work on programmes, like I write about the Aadhaar. We had many, many people, top technocrats and technicians from top companies in the world like Google and Microsoft work for free for over a year on Aadhaar because it was such an important project and it would have had such an impact. So, it is a very great question. I think we could spend a whole hour discussing it. It cuts to the heart of my new book, How Should Government Be? because I think that governments in many ways are like other organizations.
The question I pose is, how can government organizations get better at what they are doing in the way that companies have got relentlessly better at what they’re doing over the last few years, using new technologies, sometimes ubiquitous technologies like digital technologies, and new forms of organization to do things faster, better, cheaper. If companies like Amazon can do that for their customers, why can’t governments do the same for their citizens? That’s the question that I posed.
The key operating principles
But then I also acknowledge that governments may have a slightly different role. For instance, one very interesting area of difference between governments and companies is that companies can choose who they wish to serve for their products, and develop their products for. Governments don't, cannot do that, or should not do that. They need to be inclusive, they need to serve all the citizens. And particularly, they have a duty to serve those who are typically left out of social and economic processes or political processes. So that is a principle for instance, that I think is somewhat different in government.
But some other principles that I explore, like, how can governments be responsive? That’s true for large companies or small companies. How can governments be experimental? This is happening with large companies all the time. They’re constantly trying out new ideas, testing them, and then deciding whether to scale them or not? Another principle I explore is entrepreneurial, proactive governments. I think governments should be proactive, engaging early with new technologies and new players to see what the implications are for the economy and society. Companies are constantly engaging with new technologies. And then the final principle is being innovative, creating a culture of innovation throughout the organization. And this is something that companies obsess about. And now governments are also thinking very hard about it.
There’s a philosophical point that you raised early on in the book, which I think the private sector doesn't face so much, but all governments do—and that is the constant battle between the left and the right, the Statists versus Libertarians. And probably this has serious implications. In your book, you talk about the controversy surrounding Aadhaar, the pushback from civil society, and some of those criticisms go back to the point that you mentioned. Should the government be in this? How much data do we give to the government? And so on. How has this played out in various countries that you studied, in Latin America, China?
This is another area of distinction between the government and the private sector. Of course, in the private sector, too, you have ideologies, but perhaps not of this nature. We see increasing polarization around the world of people who ascribe to one or other ideology, and actually, it’s not so neatly down the left and right divide. Things have become a little more complex. Now, there’s identity politics, and yes, nevertheless, ideology is an important issue.
Libertarians, statists, and citizens
When we talk about the public sector and the private sector, often the ideology falls into the following attitudes. You might think that libertarians, people who are sceptical of the state, are generally a little more positive about the market. I think that’s generally the case. They somehow are more trusting of managers in companies than they are of bureaucrats in the government. They think that bureaucrats are typically incompetent or could be even corrupt, whereas somehow managers are very efficient and are accountable.
And you have the opposite set of views of people on the left. Typically the Statists are very sanguine about governments, they think government is a benevolent force, they tend to trust government, and bureaucrats and they’re suspicious of corporations.
I think citizens, wherever they are, are in a curious situation, because they are now dependent on digital technologies and digital services coming from both the private sector and the public sector. And that data is being harvested and being used. And they are in a bind, I think, because on the one hand, they need the services.
Particularly during Covid, we were so dependent on Amazon, so dependent on Google and so on. But equally we are dependent on our states. In India, people will be dependent on Aadhaar, and the public distribution system. In the US and UK, people were getting income support, Social Security, a lot of it through digital means, including digital banking. In the UK, for instance, the government is exploring Covid passports, where you may do some home testing, and in order to get admission into any kind of public space, like a restaurant or a concert, you will have to show that you had a recent test and or the vaccine, then that would be done digitally on a phone. And that would of course be data that they would have on you.
The question is now for all citizens and customers to think about what is the contract that they're entering into, with whoever the provider is—a large company like Google or Amazon, or the government, the regional government, the city government or the national government, because in both cases, there is the potential to benefit from that contract. But there's also the potential to be held hostage in some way where that typically monopoly provider will have the ability to sell your data to someone else, or use it to gain insight, or to develop an algorithm that learns on your data at your expense. And you are not sure about how the data is being used, what your privacy is, and the security of the data. That’s one of the big questions I raised in my book given that we are entering and have entered already, this world of digital technologies and data, and that data is so precious to so many different people, and they are using it for all kinds of purposes.
The question for us is where should that data reside? Should it reside in your country? Or some other country? Should it reside on the servers of a private company? Or should it be within the government's control? Is it within the reach of your national judiciary, to legislator to pass laws or to decide on in cases of disputes? So these are the kinds of questions I raised. I don’t know if we have an answer yet. I just raised them as things that we really need to be thinking about
You were talking about Bangladesh, and how your interest expanded when you looked at BRAC. And you also talk about other government-led initiatives in Bangladesh. One of the things that I found interesting was that it is not just about rolling out technology, but it is a broader engagement with those who use technology. How common is it for the government to look at a technology project in a broader way, where they don't just think of it as the rollout of a technology, but consider multiple stakeholders and look at it as a part of a bigger system?
Yes, Bangladesh is a very interesting example. And you're right. I don't think most countries and governments really think about technology in a broad way. And that is why I wanted to write about that particular case of Bangladesh and the UNDP, initially called access to information (A2I) programme, later, Aspire to Innovate, and linked to their political programme, Digital Bangladesh, which was introduced probably about 10 years or so ago.
I find that very interesting, because they went in thinking it’s all about technology. And this is what often happens with governments, whether we are talking about governments at the city level, if you think about smart city programmes, that mayors may lead, or you think about even national programmes like Aadhaar, in some cases, even things like China’s social credit system—you often think of these digital transformation programmes as being all about technology, just introducing digital technology, introducing the internet, access to the internet, introducing 4G, mobile penetration, that will solve the problems of whatever the society is facing. And actually, it is not as simple as that. And in fact, that is actually the wrong way to proceed.
That’s true even in the private sector, thinking that innovation is about technology is the wrong way to go. Often, really successful innovation is one that starts with what is the problem you’re trying to solve from the perspective of the person you’re trying to help or reach the customer or the citizen. Once you’ve understood the problem, and you really know what you’re trying to achieve, and saying, ‘what is the appropriate technology we should use?’ And how should that technological solution be organized to reach and it may not actually require technology, may not require high technology at least the solution.
Governing from outside-in
So that was one of the things I found particularly impressive about the A2I programme. They started, like many other operations, with the technology in mind, but very soon realized it was about mindsets. And it was about culture, it was about norms and values, and that you needed to ensure that your bureaucrats, the people who are in contact with ordinary citizens, all the way down to the grassroots people who are in the government, not just in the elites of the government, but, down to what they call the union parishads, which is the lowest level of government, they have to have a mindset, which puts the citizen first, working outside-in rather than inside-out.
And that’s very rare in any large organization, public or private sector. In the private sector, they may pay lip service to customer service, but often, it’s all about our products and pushing our products on to you, the customer. And that’s particularly true in the government. It’s about our way or the highway. If you’re a citizen, this is how things have been done in the government for 100 years. And whether you like it or not, you have to toe the line.
But they gave them training, including something called empathy training, where they would actually go out. The bureaucrats from different departments will go to another government department, and actually stand in line for a particular service, like an ordinary citizen, go through the whole process, and then reflect on what the experience was like. And could they have improved the experience? Then they would do the same thing within their own department. And they would reflect again, on what they could do from the citizen’s perspective to improve the service. And then they would go into designing what in the private sector we would call business process design or redesign. They would read up the government service process, and they found ways to improve the service, keeping in mind a very concrete metric, or what they call TCV or time for the citizen to get that service, the cost to the citizen and the number of visits the citizen would make. And that became the metric by which they would design and measure all government services. So that is quite a remarkable programme.
You tend not to see that kind of awareness of organizational issues or softer issues like culture, mindset, empathy, and so on. But for me, as a social scientist, and as someone who works in a business school, studies organizations, that is crucial to the success of any innovation. You really need to have that customer centricity that outside-in kind of mindset. And you need to have this mindset of “First we have to think about the problem we’re trying to solve, then think about what are the relevant technologies, so it can be technology not for the sake of technology, it’s technology pressed in the service of solving problems for people.”
What does it take to create such a mindset? And, how much of what Bangladesh did is exportable?
Those are two very important questions, but let’s take them separately.
Let’s take the first one. Which is, why is it that organizations—and again, I think this is true even in large private sector organizations—even if they say they wish to be outside in, if they say that they are customer-centric, invariably, it’s not that way. It's inside out. It’s our product pushed on to you. It’s our way or the highway. And why is that so in government as well? And therefore, why is it that, new projects, even if they’re well intentioned, new products coming from companies, don’t work and new services that have been delivered by the government don’t work, even if they’re well intentioned? What happens?
I think it’s because of this mindset. To me, it really comes back to what we were saying about Bangladesh and A2I that in any organization over a period of time from where you’re sitting as a functionary in that organization, as a manager, as a bureaucrat, you’re looking inside out, and you are more familiar, you’re closer to your products.
If you’re making cars, you’re thinking about your cars, and then you’re thinking about the customer. You have the simple fact of your product staring you in the face, and these are things we made, these are our babies, we are proud of them, we think that they are the best in the world, and, those silly customers, why don’t they see it? And they should see it, and we’ll make sure they see it, and we’ll spend money to advertise it so that they will see it.
And in government, you have even more of that kind of attitude, which is, where the government says, “We know better. And if the citizens don’t see, we’re well intentioned, we have their interests at heart. If they see that, then we’ll make sure we pass a law that makes them do what we tell them to. And, this very deep seated approach is certainly the traditional approach of the large monopolist Corporation, also of the large, public sector organization.
But, the world has changed, that power balance has changed. Customers, or citizens can organize, they can retaliate, they can resist, they can, they are not going to be told what to do. They want the company or the government to be an equal partner, at the very least, somebody who treats them with dignity and takes them seriously.
It comes down to that mindset. You can do remarkable things in short periods of time, if you have the right mindset. And in fact, I am not a big fan of having endless amounts of time to achieve anything, because then the work expands to fill the available time. I’m very interested in frugal innovation. And frugal innovation is not just about conserving money, or energy or raw materials, it’s about conserving time, too. And often, time is of the essence in the public sector, you need to get things done quickly. If you think about the Indian judicial system, court cases take so long that really justice delayed is justice not done.
I don’t think it’s things like time, if you have the right mindset, and you approach the project in the right spirit with the right method that is starting ‘outside in’, trying to understand the problem, spending a lot of time on the problem, the solution then tends to follow much better and more efficiently and effectively. So that’s the first one.
Now, your second question about how exportable are these ideas? That’s a great question. And it is a very important question to ask, because I think it’s a fallacy to think, in the social sciences, that if something works in one country, it is bound to work in the neighbouring country, in the next country, because conditions can be ever so slightly different in the next country, or in the next time period. And what worked in one country in one time period, may not work in the other country in that time, in the next time period. So there’s something about just the blueprint of the solution may not work, but then there’s the implementation as well. You can have the same blueprint, but it can be implemented in a very different way. A lot in the social sciences, and the social world comes down to implementation. So, we should take with a pinch of salt, anything that has been done somewhere else, whether it has failed or succeeded, we have to think carefully. A great idea could have failed in a country at one point in time, but could be a roaring success in another country or another point of time. And that could be because the conditions are slightly different, or because it was just implemented by a better team.
Stealing like a magpie
Now, that said, I still think we need evidence-based policy. So, saying that, ‘oh, you know, that’s not going to work here’, that’s lazy. If you just say, ‘Oh, that’s not going to work here, because we are different. It worked in Bangladesh, but Bangladesh is smaller than India. So it’s not going to work in India’, that’s lazy.
You’ve got to go beyond that and say, ‘why wouldn’t it work? And what would it take to make this idea work?’ You need to think about adapting the idea. And you’ve got to be open to what has been done elsewhere, because that’s how you get inspiration. That’s how innovation happens in the private sector. Some brilliant ideas come from very different sectors, somebody in banking may be inspired by something that happened in automotive, some, an innovation in the UK, financial services sector could be inspired by an innovation in the Kenyan financial services sector.
In the private sector, innovators are like magpies, they steal from everywhere. I think in government, we should be the same thing. We should have bureaucrats who are eager to learn from other countries, from other contexts, but they should apply with caution. And that’s why I have a whole chapter on the experimental state, where the point is, you have to try out stuff. You could be inspired by others who have tried it out there. But try it out in your context, first in the pilot, see if it applies in your context, see what needs to be adapted in your context. And then scale it. And then you have evidence-based policy.
There is another conflict. On one hand, innovation happens when the bureaucrats take an outside-in view. But on the other, when we look at a project like Nudge, which you talk about in the book, it is looked at as benevolent paternalism and there is a huge debate on whether Nudge is better or Boost is better, whether a government can assume that they know what is right and manipulate the choices of citizens versus expanding education, so people make the right choice. In India, they use nudge techniques to increase toilet usage. I’m not saying that those things are bad, but where do we draw the line? And are there any lessons that emerge out of the UK experiment?
I think it’s one idea, a very interesting innovation in government. And it should be a part of the toolkit of anyone in government.
I’m a big believer in tools. These ideas are our tools. One might be like a screwdriver, one might be like a hammer, one might be like that drill, one might be like a nut, like a bolt. These are tools you need to have in your toolkit. And there’ll be a time when you need the screwdriver for a certain purpose, and you don’t want to use a hammer at that time. At another time, you might want a hammer. So, I think governments have a whole bunch of tools, some tools they use more than others. And really, they should be thinking about expanding that toolkit and being very aware of which tools work best when. And so on the whole it actually combines and it’s a nice middle ground between two extremes.
Again, if we go back to the ideologies, we have libertarians on one hand and you have Statists on the other. Basically, they are two extremes. The libertarians are kind of laissez faire, and they say the government shouldn’t tell people to do anything. Sometimes that may be foolish because there are all kinds of negative consequences of laissez faire.
On the other hand, Statists will say, ‘Oh, no, the government should always intervene’, you know, the nanny state, the government should tell people what to do, because people are stupid and need to be told. And of course, we can see sometimes people do behave stupidly and there’s a need to be told, let’s say like during a pandemic. But very often people have the ability to decide and make the best decisions for themselves. And actually, in the long term, maybe you should encourage people to do that. And if you’re constantly telling them what to do, you’re diminishing their ability to make the right decision. So again, I see these extreme positions as actually only applicable in certain situations. They are again, like tools for me—laissez faire is a tool, state intervention is a tool. There is a right time for each.
The middle path
Nudge falls in between, because it says there is a role for the state, the state can help people make the right decisions about how they live their lives, in terms of eating and healthy living, and so on. But, we don’t want to be too prescriptive. We just want to suggest to people, okay, these are your options, why don’t you consider these options. And if you really want to live a healthy life, think about cutting down on unhealthy food, think about exercise. In a pandemic, look, you really want to be washing your hands, you don’t want to be going out. So again, it’s a whole spectrum.
Behavioural insights sit nicely in the middle of that. There are lots of very interesting things that the behavioural insights team in the UK has done. So much so that that group has grown very large from being a small skunk works in the Cabinet Office, about five to 10 people, it’s now about 250. It has been hived off. I think that is a really interesting, very important move. So it’s not in government, it acts as a consultant to government. It’s part owned by the government, but they have autonomy. It is part owned by a think tank, and it’s part owned by the employees themselves. And they have spread their ideas and their model to many other countries, both at the national level, as well as at the provincial or regional level. So I think countries like India could gain a lot from that.
The way I see behavioural insights is another tool. And linked to behavioural insights is the experimental method. When you try out anything, you try it out in a way that you’re collecting data in a systematic way, you do a kind of randomized control trial. So you have a benchmark, you have a basis for knowing that intervention works or not. And this goes back to your previous question about whether ideas are exportable. We’ll only know if they are exportable, if you have some evidence to suggest that they worked or didn’t work. So I think, the short answer, that’s a great approach and ought to be tried elsewhere, including in India.
That actually brings me to the question on exponential technologies. We don’t know how it will work—something like AI, self-driving cars and GM food. You devote several sections in your book to how governments regulate these technologies. We don’t know what the second order consequences will be. And many don’t understand the technology themselves.
This is a big area. And this is an area where governments are still the only game in town, the only organization that can regulate and pass laws about new technologies. And so regulation becomes very important.
And as you point out, we’re on the edge of many very transformative technologies. We’re at the cusp of things like autonomous vehicles, connected vehicles, robotics, AI, GM. All these areas are really maturing now. They’re going to take off and there are huge implications for societies and the economies. And the state absolutely has to be on board here and has to be, as I say in the book, highly entrepreneurial.
By that I mean, the state has to be very proactive in engaging early with these technologies and the various players, because many different players will be involved. There will be large and small companies. Take a specific example of autonomous vehicles. Many players will be in the space. There’ll be large and small car companies, there’ll be software companies, telecoms companies, legal and insurance companies, universities will be playing in this space, and of course citizens.
There’s a huge upside potential, that autonomous vehicles could reduce the drag dramatically, reduce the number of people who die every year in road accidents around the world and reduce emissions tremendously. Because we’d have much more efficient use of vehicles in traffic, it could reduce the amount of space needed in our cities for parking. That would free up space for other things like parks and housing. So it could be transformative on the upside.
But we can also see potential dark sides, particularly through employment because large numbers of people currently are employed as drivers of cars, taxis, buses, lorries, trucks, and haulage. What’s going to happen to those people, to those jobs? And if they lose their jobs, what would they do? You know, can they easily be retrained to be AI engineers and software programmers? That may not be achievable overnight.
Early mover advantage
So, governments have to go in early. And they have to be proactive, they have to, as I say, in the book, steer and not row. They should resist the temptation from trying to do everything themselves. Equally, they should resist the temptation of being laissez faire and saying, “Oh, let the market take care of it. We don’t need to do anything.” There are serious downsides of being libertarian. If you don’t have clever regulation, the market will not materialize.
It’s not just about government spending on new technologies. That’s the view of certain people like Mariana Mazzucato. I don’t agree with that. I think you have to do some spending, but clever spending. But more importantly, the government has to have smart regulation, has to very clearly set the rules of the game for different players to play, and also have a level playing field so that different types of companies can engage, not just the large monopolists and traditional companies. And so governments have to be entrepreneurial in the sense, they have to be proactive, they have to engage early. And by engaging early, they will learn with the different players.
So with autonomous vehicles, I point out how different US states like California, and the UK government, for instance, have done precisely this. They went early and had a very clear, open regulatory system policy where they said ‘we’ll allow anyone to come in and test their cars, even on public roads, where there may be normal traffic. But there are certain conditions you have to comply with. The vehicle has to be registered; there has to be a human operator in the car to take over at any point, you have to collect data, you have to report on disengagements when the system is working, or all this kind of stuff. And in the process, you will learn a lot about where the technology works, what are the drawbacks. What are the great benefits? You will learn but you will also help us learn what we should be regulating down the road. What are the things we need to be concerned about? When will this technology work? Not work? How does it interact with existing cars on the road? pedestrians? How does it work on city roads, busy city roads in neighbourhoods, suburban neighbourhoods, out on the freeway, all these kinds of things.
And by doing that, you stimulate industry to come in, you will stimulate learning from industry, you get foreign direct investment, you get all these players working together. But you as a regulator also know early what are the issues to look out for. And how should you formulate laws going forward? That will help you achieve both on the one hand, a thriving economy in that space, but equally, you need to watch out to protect the citizens. You’ll also know about what are the skills that are needed so you can ensure that you know the right kind of employment opportunities are created for people who might be losing employment from this new technology. So that’s one of the key things.
A very interesting approach of philosophy that I’m very keen on is this idea of trying out pilots with new technologies, where you pilot and you practice on real customers. But in a protected space, where if there are failures, the cost of failure is not systemic, and this is known as the regulatory sandboxes. So this has been tried very effectively in the UK, with financial services, particularly FinTech. In the UK, the FSA, which is the regulator for financial services, says to FinTech companies, “we will give you a sandbox, a space where you have access to real customers. You can try out your business, and we’ll see if it works or not. And if it works, great, we can then give you the license to operate. If it doesn’t work, then, you know, the costs are not great. We have tried out an experiment, but the system has not had to suffer the consequences.”
And that's the same approach that is being used with autonomous vehicles. We will let you trial even on city roads, but under controlled circumstances where we protect the citizens, but you also learn about what works and what doesn’t work. And I think this is a very powerful notion, which really needs to be adopted elsewhere by regulators.
A new breed of regulators
And this comes to your second part, which is who are these people we should be having as regulators? Yes, we need to have people who are bureaucrats who understand how the government works, how the executive works, how the legislature works. People who care about the public interest. But we also need people who are technologically savvy and who understand how businesses work. So where I teach in Cambridge, we have in the business school a master’s programme called MPhil in Technology Policy, where we’re actually training our students to engage with new technologies like artificial intelligence, autonomous vehicles, genetically modified insects, and organisms. And think about what are the likely upsides and downsides? How will industry engage with it? And having understood that, then think about what is the smart policy?
How can policymakers ensure that you get all the benefits of these new technologies, while mitigating any of the drawbacks? And to do that, you need to understand how the private sector thinks and works, not just within a country, but internationally, and you also need to know about how technologies work. So I think that we need a new type of person in government, somebody who is an innovator, who may have worked in the private sector, knows the mindset of the private sector very well, and then comes into government to regulate to ensure that we get the best for the private sector, but not at the expense of the ordinary citizen.
In the book, you say citizens too have a role to play in electing the right type of leaders. You give some pointers, the one on how they balance ideology with pragmatism. It’s a question that we in fact started the conversation with. Can you elaborate on that?
That was actually, in a way, the most interesting part of the book for me as an ordinary citizen myself, who’s lived and worked in India, in the US, in the Netherlands, and now Britain. I spent most of the book—nine chapters—thinking about how the government should be. And actually all the time, I was thinking about this from the perspective of the citizen, like myself—I would consider myself like an ordinary citizen, Aam Aadmi, as we would say in India.
The role of the citizen
And, then, it struck me that no matter what we might say, and want our governments to be like, we have a very important role to play in ensuring that the government is what we want it to be as citizens.
How do we ensure that it does? If we are lucky enough to be in countries which are democracies, we do that by voting. When we vote, we need to think very hard. I would say we don’t, perhaps many of us don’t vote. Even those who vote, how hard do we do our research? When we buy a mobile phone or computer, I would argue, we often do much more research than when we vote. We really need to think hard about who will we be voting for, not just the leader, but also the team.
It doesn’t stop with the elections. When somebody wins, we have to hold them to account for what they said they would do when they came to power. And often there’s a slip between what they say and what they do. So we have to hold them to it. How can we hold them to it? We can do that by protesting, using the press and using our voice. And, there are many, many examples of protest movements, or some of these go global. You’ve had Black Lives Matter recently, you’ve had the extinction rebellion, you’ve had the metoo movement, you’ve had various protests that followed the financial crisis. And they spread virally. And a lot of that is happening because of digital technology, mobile phones, social media. Citizens can get together very quickly, share opinions, organize, even in autocratic societies, they can move very quickly, which is why in autocratic societies, the state is trying to control and have a monopoly over these technologies. So that’s a lot the citizens can do from outside the government.
But my conclusion was that, in the end, if you really care about how your government should be, perhaps the best thing you can do is to go and work in the government. And you can do that as a politician at any level. But I think more importantly, you could do it as a bureaucrat, as a civil servant. I find something very noble about that role, maybe because my family are civil servants, and I have engaged with many civil servants from around the world. I find that something very noble about working in your government, for the benefit of all, not just for the customer of your company, or your shareholder. And I think that we need our brightest people to actually go and work in government for the benefit of all.
Thank you so much for your time. I hope more people read your book, because we tend to focus too much on the country that we live in or focus on projects that the media shines the light on, but this opens up so many new things. More importantly, the lens that you wore to look at was fascinating. Thank you so much.
Thank you. I feel that often in the press we only hear negative stories about the government. Of course, that’s the role of the press—to hold the government to account and one way to do it is to talk about all the things that are going wrong.
But in talking to and researching this book, I realized that there’s also so much that is going on right now in societies and governments which we don’t notice. Therefore we might think that things are bad. But actually things are not so bad. They have been worse and they might get better.