On 25 June 2009, Eben Upton received a reply from the East of England Development Agency. He and his colleagues had recently applied for a loan guarantee to start a new company making a very small, very cheap computer that would help people learn programming. The response was not encouraging.
“Thank you for your application,” it read. “Given the widespread availability of ‘proper’ computers, the rationale for . . . a device that reverts to the early days of computing is not persuasive.” The panel also noted that the demand for application programmers has fallen since the last decades of the 20th century, and it was felt that “the number . . . is unlikely to rise to previous levels.” The email then added that “the National Curriculum does not specifically mandate programming skills”.
This letter is tech’s equivalent of Decca Records’ declaration, when declining to sign The Beatles in 1962 that “guitar groups are on the way out”. Despite the doomsaying of the East of England Development Agency, Upton’s Raspberry Pi computer quickly became the biggest selling computer Britain has ever produced, with more than 10 million units sold in less than five years.
Better still, it is – unlike almost every other computer on the market – made in Britain, and its popularity in schools has led to a demonstrable increase in the number of people applying to study computer science. Why does its creator think the government is poor at spotting promising emerging technologies?
“Large organisations struggle to allocate money to the right things,” Upton says. “We know that central planning doesn’t work, for a variety of reasons. There’s an information problem – it’s hard to get information into the centre about what’s going on at the edges – and it’s also difficult because of politics.
“Resources tend to flow towards people who are good at playing the game. If you’re good at playing the game of Get Resources, you get more resources and more power and more experience of getting resources. The wrong things get funded. That’s true of government, and it can also be true of large companies. It can be true of any large, centrally planned organisation – corporations are little mini Soviet Unions, they’re miniature centrally planned economies. But corporations have a way out – they can buy other corporations.
“Over the last 50 years, we’ve seen a gradual de-emphasising of the idea of research and development, or at least internal R&D, towards – I’ve heard it called research and acquisition. Rather than trying to develop new technologies or products yourself, you as a corporation focus on trying to do the things you’re already doing really well. And you rely on the little nimble guys to run around discovering new things to do, then make sure you’ve got a good enough radar to spot them while they’re still small, and you snaffle them up and apply your big-company economies of scale to make those things work. That’s the established private-sector solution to the problem.
“On the startup side, you see a lot of companies that are starting up really with the intention of being acquired. So both sides co-evolve towards each other – and you see this in pharmaceuticals as much as in the tech sector. It leads to a profusion of small companies that might never turn into large, self-sustaining businesses, but that’s not the point. It works, it delivers growth. The annoying thing is, I’m not sure anyone has a plausible story as to how the public sector can learn from this experience.”
Examples of the misguided attempts by government to participate in the private sector’s ecosystem of research and acquisition are dismayingly easy to find, but the most resounding clanger of recent years must be Impossible.com, the “gift economy” website that was awarded £200,000 of government funds at around the same time as Upton was launching the Raspberry Pi. Described by The Spectator as “disastrously vacuous” and The Register as “a website that replicates the ‘Help Needed’ pages of Craigslist and Freecycle”, Impossible.com is reported to have lost around £250,000 per year since it launched. The crucial difference in securing funding was not the validity of its premise, but the fact that it is the brainchild of the supermodel Lily Cole, who at the time had a personal wealth estimated at £7m.
Upton says a more effective way for government to stimulate innovation can be to invest at scale, over time, and with the goal of creating regional centres of excellence. “In 1978, the government, through the National Enterprise Board, invested £50m in a company called Inmos, based in Bristol. They built memory and processors, including the famed transputer, which was innovative but never became a commercial success. The business never became profitable, and after consuming more than £200m of government funding was sold to the French-Italian company SGS-Thomson in 1989; it was a failure. But if you go to Bristol now, the place is crawling with chip companies, and in fact the chip we use in the Raspberry Pi 3 was largely designed in Bristol. When industrial policy investments work, it is often in this sort of non-linear way.”
One of the key differences in the way the public and private sectors successfully invest in technology is duration. The staying power of public-sector investment is its unique selling point. “Inmos was there for more than a decade. Throwing some money in, letting it burn up in two years and then it dries up and blows away – that’s very different from putting money in for something that’s going to exist for 10 years.”
Magnify this kind of investment, says Upton, and you can explain the success of the biggest and most lucrative centre of innovation in the world: Silicon Valley. “People draw completely the wrong conclusion about Silicon Valley. Why is Silicon Valley where it is today? The answer is, about a trillion dollars in defence spending. The federal government spent an enormous amount of money over a long period with giant aerospace companies such as Lockheed and Westinghouse: that’s where a lot of the smart people came from. And often, those people had kids, and their kids didn’t go to work for Lockheed. The kids went to Stanford, and then founded tech companies, and those companies were able to hire from a pool of talent that was already in place.
“The mistake that governments make, a lot, though, is to try to build copies of Silicon Valley as it is now, rather than looking at where it came from. A long-term investment in something, even if it fails, can have the side effect of pulling lots of clever people into one place.” Counterintuitively, then, it may be that the most successful policy for fostering innovation is to look for the things that seem likely to fail, and which have no obvious commercial application.
“They have the Defense Advanced Research Projects Agency [DARPA] model in the US, where they spend money on ‘moonshot’ ideas that might turn into something, with one or two very notable successes – one of which was the internet.
“DARPA will pretty much fund ideas in proportion to their outlandishness – the internet is a very weird idea – where the East of England Development Agency was only able to fund things in direct proportion to their conformity to existing ideas.”
Should the government, then, be in the business of funding “moonshot” ideas? “In my view, the right thing to do is actually to fund basic university research better. We already have a system for doing moonshots: university researchers. If you work in the government and you’re tempted to be a venture capitalist, quit and try to get a job as a venture capitalist. We know that the government is good at funding universities, and academics are good at reviewing each other’s grant proposals to allocate that funding effectively. So, we have a working system there.
“It’s worth bearing in mind that the government activities that have really helped Raspberry Pi have been very traditional ones. The provision of free education, which created our workforce, the promotion of foreign direct investment, which led to the construction of the Sony factory in South Wales where we build the Raspberry Pi, and then reform of the computing curriculum, which was also to our massive advantage – this is pretty conventional stuff. It’s always been this way. Look at the BBC Computer Literacy Project, which gave us the BBC Micro: the government simply gave grants to schools to buy computers, which again is very conventional, but the long-term impact on UK industry was transformative – much more so than any speculative investment in an individual start-up.”
For Upton, while there are many questions to be asked about funding at the surface level, the broader perspective is that he and many other successful technologists have been aided over the decades by the education, the infrastructure and the economic environment that the UK government has provided for them.
“I think our government’s quite good at what it does, actually. It’s been there for hundreds of years, and has an enormous depth of experience. We’ve got this very capable machine for doing traditional government things, and as long as we can keep it focused on those then it has the potential to be an incredible source of competitive advantage to our country.”