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How Britain could have invented the iPhone: And how the Quangocracy cocked it up

Inventor screwed - while taxpayers sent a clown on holiday

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The Aftermath

It would not be fair to say everybody has been a loser in this story. Certainly, the inventor and the British technology industry and the British economy lost out. But for many others, life has been kinder.

In recent years the determination to throw taxpayers' money at “innovation” is a belief held with something resembling a religious mania. The result is a complex web of taxpayer-funded agencies that create a kind of self-perpetuating talking shop.

Nesta itself was earmarked for closure prior to the anticipated “bonfire of the quangos” – but instead the Conservative-led Coalition of 2010 gave it a new lease of life. Although it became a charity, it retained its endowment.

Geoff Mulgan, founder of the thinktank Demos and former director of No. 10’s Policy Unit, became its head. After being repurposed “to improve the innovative capacity and the innovation systems of the UK”, it is once again investing in startups.

“NESTA became the UK's single biggest seed capital investor, which is something that we probably all applaud,” said Baroness Hayter in the House of Lords.

What should the state fund?

One of the high priestesses of the religion of state intervention in innovation is an American, Professor Mariana Mazzucato of Sussex University. Mazzucato’s book The Entrepreneurial State has made her one of the BBC’s favourite economists.

"Yes, innovation depends on bold entrepreneurship. But the entity that takes the boldest risks and achieves the biggest breakthroughs is not the private sector; it is the much-maligned state," according to one review of The Entrepreneurial State. And there's truth in that, though it is generally the nasty old Defence department - not the biznovation bureaux - which makes most of a state's real tech breakthroughs (computers, integrated circuits, space rockets, jet engines, packet-switched networking, satellite navigation etc etc).

But apparently the state does more. According to Mazzucato, as cited by Polly Toynbee, “huge state investment in touch screens” gave Apple its advantage. Mazzucato went further: “all the technologies that make the iPhone ‘smart’ are also state funded”. [p112] For Mazzucato, the state had made “an investment” in Westerman’s multitouch but failed to “recuperate” it. [p72] (sic)

Critics and academics laud Mazzucato for her critique of “neoliberal capitalism”, for challenging “the neoliberal orthodoxy”.

But for the patient Fentem, Mazzucato’s take on what had become part of his personal history was too much. In response to a superficial but positive review of Mazzucato’s book by Martin Wolf, The Financial Times published a letter from Fentem in which he pointed out that in Britain at least, "state entrepreneurship" didn't work - in particular on the matter of touch screens.

He had been forced to use his own savings to fund pre-iPhone multitouch technology, because “the UK government body that promised to support the development and commercialisation of the research work (Nesta) had failed to transfer the bulk of the funding I was awarded. Its main priorities seemed to be institutional self-preservation and public relations, rather than supporting entrepreneurship”.

Analysis

The enthusiasm for Mazzucato’s proposition of investment from publicly funded agencies is boundless – but is this really healthy for UK plc? Mazzucato embodies the problem: receiving as she did generous funding from the state (her three-year FINNOV project was funded by the EC) to laud the virtues of the state directing innovation investment.

Fentem’s criticism that the politically homogenous nature of public appointments is unhealthy is certainly supported by the evidence. More than 77 per cent of people with political backgrounds who were appointed to public bodies last year were aligned to Labour, noted the Times' Alice Thomson.

“Tony’s cronies are still with us and Gordon’s men have dug in. Labour understood how to play the quangocracy. They encouraged their supporters to apply for junior positions on boards and in organisations and watched as they rose up the ranks to positions of power and influence,” noted Alice Thomson in last year. (Who runs the country? It’s Labour, actually - Alice Thomson, 28 November, 2012)

One area in which the new "third sector"/quangocrat establishment dominates is innovation investment - it has become a powerful new class, for whom talking about innovation has largely replaced innovation itself. And here, it insists on taking control.

Amazingly, the rise of this micro-managing technocratic priesthood was predicted some 40 years ago by historian Daniel Bell. This academic-bureaucratic class even has a name: American sociologist Joel Kotkin calls it a "Clerisy". The Clerisy benefits, Kotkin explains, by increasing its role in directing investment - often to pet projects and causes.

"There are simply too many politicians and economists in the UK promoting stories and myths based on second-, third- or even fourth-hand experience of the world, because they only ever talk to other members of this 'elite'," Fentem opined. "It seems to me that every economist has a 'product' that is evaluated in terms of not how it explains or predicts real events, but how it will shape their media profile."

The Register contacted Nesta's current executive director of policy and research, Stian Westlake, for comment. Today's Nesta operates as a charity rather than a quango, and provides what Westlake describes as "catalytic funding for things at a very early stage" (BIS's Technology Strategy Board now does the lion’s share of governmental investment.)

Westlake said: "There’s been a growing recognition that innovation is not just about having good ideas but in making them real. It’s a long-standing – 100+-year-old – complaint about Britain that we invent lots of great stuff but someone else makes money out of it. This means that innovation includes not just R&D, but taking products to market, developing new manufacturing processes, understanding customers and other things that happen away from the lab."

When we asked him if there was an institutional bias against profit-making, Westlake responded: "We’re keen for the businesses we back through Nesta Investments, for example, to be profitable in the long run (we’re an early stage investor, of course, so this isn’t overnight and sometimes unfortunately not ever)."

The Register attempted to get comment from Mark White, who was Nesta's Invention and Innovation Director when Fentem was developing his multitouch sequencer, and Chris Powell, who was chairman of the organisation at the time. Neither had responded at the time of publication, but we'll update if we hear from them.

Labour's Emily Thornberry, Fentem's ally against the quangocracy back in 2004-5, agrees that if the state is to get into directing investment, it must do so competently.

"We have a commitment to growing our way out of recession, and this needs not only some forward thinking, but institutions that are fit to be able to deliver on this. Mr Fentem's story showed NESTA was not up to the job," Thornberry says today.

Andrew Fentem’s story is a salutary warning to actual technology innovators - as opposed to digital media types, popup coffeeshop proprietors etc - of the dangers of getting involved with Britain's new establishment. In Part Two we'll bring you the full interview. ®

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