Book review: the Entrepreneurial State

While reading books, lots of thoughts come and go, especially if the subject resonates and is connected to topics of interest. If the book is a novel or other fiction, I try to keep these thoughts away to remain in the universe and story. For non-fiction though, some of these thoughts constitute valuable elements to put on a larger frame, with other publications, slowly building context for the topics at hand. The Entrepreneurial State, by Mariana Mazzucato, definitely has some elements to put on a larger frame of economic policy, economics, on the perceived and actual role of the state and its institutions.

Changing the narrative

The main point and argument of the book is brilliant: re-trace the facts about the development of some technologies, companies, industries to challenge the established, implicit or explicit narrative about the state’s role. In that case, the narrative is the sacred effect of the market and individual entrepreneurs for building today’s greatest achievements.

The unexpected HR argument

One point I never thought about before reading the book is the talent pool each side is taking from. While keeping the sexy part of the narrative, the private firms will always attract the best talents. For sure, some people will join public services for the greater good, but some necessary talents might not join because they have major criteria on what to achieve.

If the narrative is that public institutions are there simply for controlling and punctually fixing the economy, lots of talents will be driven by private firms able to offer them to actually accomplish things and move forward. If the State is now seen as the voice setting the direction for the coming years and the rules to get there before letting the children out on the playground, people working in the “development department” as Mazzucato calls it play a part in a strategic role they would not have in the firms themselves.

If you think about it, the only public servants glorified and pictured with cool jobs in today’s representation are linked to the military or police. Think of recent corporate series you’ve seen, public servants are always those envious ones who didn’t have the courage to take the risky path.

Oh no, Apple again

To add some context, the first edition of the book was out in 2013. If I try to remember the ambient perception, tech was not yet the evil eating the world, building a startup was still freaking your parents out (at least if you lived in France), Bitcoin was still nerds’ or drugs money. And Apple was still in the general opinion the cool company building slick products. A chapter of the book is specifically dedicated to the company and how it has been helped by the US federal and state governments at various stages and for various steps of its rise. The narrative the author sets is that even the most innovative, “entrepreneurial”, garage-born companies got helped by the government all the way through, whatever version of it is told by them, the media or VCs. Still, this is a personal touch, but Apple has never been fascinating, nor have I admired the firm more than others, or had this “wow” effect to friends getting jobs there. It’s still a consumer firm building expensive toys, not solving the world’s problem. The problem with this chapter is that I agreed with the author’s underlying point before even starting it, so the content I read felt mostly like a bunch of historical facts on a company I am not that interested in.

Changing energy systems

Currently involved in a PhD involving thinking new decision processes for power grids, I naturally got thrilled to see a chapter on renewable generation and green business. The author mentions the parallel and applications of IT to these new challenges, with the nice mention of “throwing software at the problem” [1], referring to designing algorithms to cope with solar and wind power intermittency. In that case, it is indeed necessary but not sufficient. Software will at most bring information within reach of the agents needing it at the right time. This availability is only a prerequisite for enabling better decision-making in power systems, creating value shared between the different levels contributing to the various improvements. See recent work in journals such as IEEE Transactions on Power Systems / on Smart Grids, the hard problems are not data collection or transmission but making decision under various types of constraints. Nonetheless, it was a nice surprise to read an economist’s view, summary and prediction for smart grids, with mentions of programs such as demand response.

The danger of the strawman

This might be one central critic to the book, from an argument construction perspective. The whole stream of thought is built around a de- and reconstruction of the role of the State for major innovations, past and present. There is however the continuous danger of a strawman argument, the detractors of the role of the states are often described as “they”, and referred to vaguely compared to other topics for which the author provides numerous references. In comparison, re-using the same article from the Economist for the other side of the argument seems like an unfair trial.

Going further, other critical angles

If you have one take-away from this post, the book is worth reading in depth and thinking over. It strikes a nice balance between the academic rigour, providing plenty of references to go further on different topics and developing arguments with care, while staying pleasant to read before going to bed, during your commute or with your favourite cup of Earl Grey.

Not being an economist, I will not go far in comparison to other schools of thought on industrial and innovation policies. Feel free to check those other articles shedding another light on the ideas developed in the book for critical points of view but mostly this excellent summary and analysis by Nicolas Colin, whose book Hedge is next on my reading list.

Feel free to reach out any way you prefer, Twitter, email to exchange or discuss the book or this post.

Sources

[1] “Powering the Dream: The History and Promise of Green Technology” Madrigal, 2011