William H. Janeway
This week in Say More, PS talks with William H. Janeway, a special limited partner at the private-equity firm Warburg Pincus, and an affiliated lecturer in economics at the University of Cambridge.
Project Syndicate: You have often highlighted the power of state procurement to “overcome market risk by pulling innovative suppliers down the learning curve.” What principles should guide demand-side interventions aimed at boosting innovation? Which existing models – state-led or otherwise – are worthy of replication?
William H. Janeway: Michael Kremer, a Nobel laureate economist and Director of the University of Chicago’s Development Innovation Lab, recently devised a useful guide to such “market-shaping” initiatives. As a first step, the customer specifies their desired function and/or performance. This becomes the basis for an open competition, which brings, as a prize, a pilot procurement contract. That contract can be the basis for the sort of “advance market commitment” that has been successfully pioneered in the field of public health.
This approach avoids the need to “pick winners” among potential contestants. It can be viewed as the formalization of the procurement process through which the US Department of Defense (DoD) facilitated and accelerated all the technological advances that, together, created the Digital Revolution – from the first electronic computers to software and semiconductors.