High risks

There is talk around about “high risk, high return” investments. Here is a thoroughly typical talk by Epic Ventures (web site since abandoned) to a state “Energy Advisory Board.” This is speculative investment capital talk, for the most part, from folks with enough money to be able to withstand losses. It’s rather their competitive advantage, that they can try things others might not, fail a lot, and then hit it big.

Some university tech transfer folks have picked up this language and use it in a kind of naive imitative way to sell the idea that they are doing something important, like they were rich investment types “helping the university to monetize its patent assets through commercialization.”

But really, what are universities doing to deal in high risk? Universities invest virtually nothing other than fronting patenting expenses. Sponsors of research might put their money at risk. Faculty may risk their careers to go off topic or try something utterly untested. But where’s the risk to the university, and why should it be a virtue to deal in liabilities?

The idea of high risk, high return implies a 2 x 2 box, which is about as advanced as business school thinking gets, unless the triangle or the pie is more complicated.


The suggestion being floated is that somehow the upper right quadrant is the “sweet spot” for university activity. I can see why some kinds of investors would be attracted there, since the rabble without money wouldn’t want to risk it on iffy stuff, but for universities, the sweet spot for innovation is actually the lower right–low risk, high return. There’s no reason for universities to take risk, whether in terms of money at risk or liability arising from non-compliance or personal injury.

Perhaps by “high risk” folks just mean “uncertain.” But that doesn’t make any sense. Why choose less certain/high return things over more certain/high return things? That would be like saying, we shop things to rather stupid investors because they find enjoyment in being out of their depth and still making money, compared to other investors who know what they are doing and see a path from start to finish that will reward their investments.

What good is there in making a virtue of taking on “high risk/high return” IP projects? For universities, nothing.

The non-market, networked kind of innovation works toward the lower right quadrant, and that’s where university research actually does best. Rather than trying to “commercialize” university research results, a university ought to be encouraging engagement with practice. It is from practice that most commercializing opportunities arise, not from science. University policies that push for patents and technology transfer practices that push for monopoly licenses work against what universities do best.

Consider: If a graduate student invents, and the university claims the invention and licenses it exclusively, then the graduate student can no longer practice what s/he invented except by working for the licensee.

Consider: If a research team of faculty, students, and staff invent, and the university claims the invention and licenses patent rights exclusively (or does not license at all), no one can practice the invention outside of the university but for the licensee. All the training, publications, and funding are useless assets to anyone on the outside looking in that cannot get a non-exclusive license or does not want the overhead of an exclusive commercialization license.

Consider: Why should any company act on any information in a university-originated publication, given that there may be a submarine patent application behind it? The publication is no longer an authoritative guide to freedom to practice because the establishment of the patent right will lag it by a year or more.

Perhaps the problem is “risk.” Perhaps university folks talking about risk don’t know or care what they are talking about. Risk is not an easy thing to figure out. Uncertainty is a state of mind, not a condition of the world. Similarly, randomness is something that we have no means to anticipate. Risk assessments go off as folks think they find patterns and come to believe things are more or less predictable. If “high risk/high return” means “we don’t have the foggiest clue what we are doing, but sometimes we get lucky and take credit for it” then maybe the university commercialization folks have got it right. But there’s a whole lot easier policy implementation for promoting clueless luck among administrators.

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