 Thank you. I'm delighted that Martin Schmidt agreed to share with us his thoughts on innovation. Bringing together research, innovation and entrepreneurial culture is, as we also heard this morning, one key requirement for sustainable investment and growth. Professor Schmidt is particularly well placed to share his insights in these topics with the background in electrical engineering and computer sciences. His research, MIT, focuses on various micro and nano technologies. His research is not just of, not only just of high academic standards, of course. It's also very relevant for real innovation on the ground. In fact, amongst all participants in the forum, Professor Schmidt is probably quite unique in being not only the author of an impressive list of research papers, but also he's the holder of more than 30 patents. In addition, as provost of MIT, Martin is in close contact with the industry, covering both startups as well as established technology firms. So I'm glad to give you the floor, Martin. Thank you, Mr. President. So there's a very kind introduction. It's really a pleasure to be here and I appreciate the invitation to speak. The introduction sort of tipped my hand, but I think I should start with some truth in advertising. I'm not an economist. I'm certainly not a central banker. I'm an engineer. I'm a professor at MIT in electrical engineering. For nine years I've been a member of the senior administration of MIT and for the past four years I've served as the Institute's provost, which is the chief academic officer of the Institute. All told, I've been at MIT for 36 years. I like to tell people that I've been at MIT my entire adult life. Well, maybe I don't like to say that, but that's a fact. And as, as, as Mr. President mentioned, I've been actively working on the commercialization of technologies, having, coming out of my research lab, I've been fortunate enough to be either a co-founder or a co-inventor of six venture-backed startups. Not all of them are still alive. But this is the lens by which I bring my remarks to you today. And specifically what I wanted to do is share with you a bit about the state of innovation at MIT and in our surrounding neighborhood Kendall Square, which is really talking about the innovation ecosystem. I was able to, I came to David's talk, David, where are you? Okay. He never wears a suit and tie at MIT, just so you know, which has me confused about what smart casual means. But... Anyway, he'll pay me back for that later. So, but what I wanted to do really is talk about how this, give you a sense of how I view the ecosystem that grew up around MIT. And I may say things that are redundant with the conversations you had in the second session, which unfortunately I couldn't participate with. And if I do so, I apologize for that. Okay. So in 2015, Wired Magazine dubbed the intersection of Vassar Street and Main Street, which is really kind of the epicenter of Kendall Square, as the world's most innovative intersection. We like that a lot. And arguably today, one could say that Kendall Square, which sits next to and around MIT, is the center for biotech research and innovation. I actually believe that. First, let me say a bit about MIT as an institution. MIT was established in 1861 by our founding president, William Barton Rogers, in response to the increasing industrialization of the United States. And Rogers sensed that a new type of university was needed to educate men and women for this era of industrialization. MIT's model is men's at mannus, mind and hand. And even to this day, our educational construct is to blend theory with hands-on laboratory experiences. Another hallmark of MIT is our historically strong links to industry. Indeed, when the campus was moved from Back Bay to across the Charles River to Cambridge 100 years ago, it really located us amongst many of the industrial firms of the day and helped promote the sort of interactions that I think of as advanced MIT. And we continue to benefit from that physical proximity to industries that exist in Kendall Square. At MIT, we like to think of innovation as a process of moving ideas to impact. And we recognize that we must play a role in this translation. Generating great ideas on our campus is not enough if they do not move out into the world to produce positive impacts by fueling economic growth and social progress. Our conservative estimate is that every year more than 75 new companies are created by our students, faculty and staff. I say conservative because students aren't always good at telling us when they start a company. In fact, I literally met with my sophomore advisies three weeks ago and in asking them what they were doing for the summer, one of them happily reported to me that he had just got financed and he would be running his startup for the summer, but he promised to come back in the fall. True story. It's all a way of saying that translation through new venture creation is increasingly a preferred pathway out of MIT. When I joined the faculty 30 plus years ago, translation was the graduate student went and worked at Bell Labs, went and worked at IBM Research, went and worked at some large corporate lab. The IP was transferred and the idea would get de-risked in that lab and then translated. Today, it's never been easier to start a new venture and to translate the idea that way and that's what our faculty and students are doing. In addition to actively engaging in this translation activity, we've also worked to systematically develop the science of innovation and understanding the innovation processes and the factors that make innovation ecosystems effective. A principle element of what we have studied is the importance of robust ecosystems to support innovation, but more than study it, we've worked hard to create it in partnership with key stakeholders. Today, I think we're really blessed to have a very strong innovation ecosystem in Kendall Square in Greater Boston and MIT actually played an active role in curating this ecosystem. We've leveraged our endowment to strategically develop real estate in Kendall Square and we've forged important partnerships with industry, venture capital, government, and other institutions like Harvard and the Boston Research Hospitals. Perhaps some facts provide an understanding of our current ecosystem. Kendall Square is defined by its density. When you compare the region to other familiar innovation nodes that you might think of, the fact that it's such a densely packed ecosystem is I think what makes it unique. Packed into no more than about one square mile are 66,000 people that live, work, and learn there. 13 of the top 20 global biopharma firms are either headquartered in Kendall Square or have a major research presence there. In 2014, the top employers in Cambridge, not counting MIT, Harvard, and the city, were Novartis, Biogen, Genzyme, CIC, and Acomyte. Now, you might say, what's CIC? Well, CIC is the Cambridge Innovation Center. It's home to about 700 startups and because of that number of startups inside that innovation center, that ranks them as one of the top employers in the city. Another interesting point about Kendall Square. Last year, three top companies commercializing CRISPR technology, a transformative gene editing method that had very successful IPOs. All three of these companies are Kendall Square, and only one of them was founded by scientific founders who are from Cambridge. The other two scientific founders for the other two companies were based in California and Europe. But these firms come, the majority of new biotech startups that are formed today choose to move to Kendall Square because of the benefits of the ecosystem. I could share with you lots of anecdotes along these lines, but for example, I've met with a company recently that's in about its fourth year. It's a very transformative company. And when I asked the founder why they chose to be in Kendall Square, one of the things he related to me was that in the ramp up phase of moving fast for the company, they were able to go from 30 to 300 employees in nine months. And these are not just employees. These are PhD scientists. These are highly qualified biotech professionals. And to be able to source that kind of talent so rapidly has a transformative impact on a new venture. We're not unique. We are unique, I think, at biotech, but I would say that if you're going to do social networks, the best thing I could do for my graduate students or undergraduates that want to do that is to buy them a ticket to California because they have that same sort of ecosystem around social networks. But Kendall's not just about biopharma. In just the past 10 years or so, major research labs and startups have been created by leaders in artificial intelligence and machine learning, robotics, just to name some of the companies that have come to Kendall Square in the past decade or so. Microsoft, Google, Facebook, Amazon, Apple, Twitter, IBM, Watson, Toyota, and Phillips have all set up shop in Kendall. I think Phillips is an interesting example. Phillips established in 1964 their North American research headquarters in Briarcliff Manor, New York. This is where Briarcliff Manor is. One. Okay, it's about 50 miles north of Manhattan, right on the Hudson. It's beautiful. Very pastoral. Great place to have scientists think big thoughts in the 60s. But what they decided in 2015 is they relocated the entire operation at Kendall Square. Why? In the words of the CTO, the person running that research headquarters, they needed to be closer. They needed to be a dense ecosystem that connected them to all the leaders in their fields. I thought that was kind of an interesting testament to the importance of these dense ecosystems. In addition to these commercial entities, new powerful inter-institutional organizations have also been created. The Reagan Institute was formed as a partnership between MIT, Harvard, and MGH to seek a vaccine for AIDS. The Broad Institute is a partnership between MIT and Harvard to improve human health by using genomics. I think it's very important that we as institutions figure out how to partner and leverage our collective strength, and I think we're particularly proud of the partnerships we've been able to create between MIT and Harvard and the research hospitals in the Kendall area. So what makes Kendall such a robust ecosystem? Well, let me start by saying that it's not always been this rosy in the greater Boston area. In fact, I often reflect on Annalise Saxoninan's book, sorry, I mispronounce her name all the time, Regional Advantage, which I think provides an important lesson regarding an opportunity missed by our region. In that book, she offered a hypothesis, which I find compelling, to explain why Silicon Valley was able to keep up with the fast pace of technological progress during the 1980s while the vertically integrated firms of Route 128 Beltway in Boston fell behind. She argues a number of points, but one that I find is key was Silicon Valley's tradition of cooperative exchange. In Silicon Valley, you had the famous Traders' Aid of Fairchild Semiconductor and later the PayPal Mafia. These founders, as they went out to create their next ventures, established a culture that allowed you to compete fiercely during the day but go out drinking beers together at night or playing softball and the sort of fluidity booth which people move across companies in the valley is, I think, a great testament to why they were able to accomplish what they did. And that network, I think, really helped support each other. If you contrast that with the culture during the mini-computer revolution in Route 128, the leaders of that industry, like Digital Equipment Corporation and Data General, were mortal enemies. And you did not consort with the enemy. An employee that left Data General to go to work to DEC or vice versa was persona non grata. And this, in the end, we know what the result of that was. That region missed the micro-computer revolution, missed the semiconductor revolution. Thus, in our view, the key is the collaboration of major stakeholders. Those stakeholders are research universities and laboratories, large companies, startups, venture capital and government. Let me talk a little bit about how each of those organizations contributed to Kendall Square as it is today, and then how they collaborate. MIT, for its part, undertook a significant repositioning towards the life sciences. It started in the 1970s when our biology department literally did a pivot to molecular biology. They abandoned certain elements of biology in order to focus on molecular biology. But it's progressed to the point where life science research permeates nearly every science and engineering department at the institute. This has led to new companies, or it led to new companies at the time, notably Genzyme and Biogen, both of which had MIT science faculty as part of the founding team. With the growth of these leaders, with the growth of these leading organizations, we were successful in attracting other large biotechnology technology companies to the area. Even though Novartis is headquartered in Basel, Switzerland, they moved their research headquarters to Cambridge, and in 2014 they employed more than 2,700 people in the Cambridge research facility. That's the story of MIT. That's the story of the large biotech firms. The venture capitalists moved out of Route 128 and into Kendall Square in the past decade. They've created a very robust venture capital sector, but more importantly, they've created a very specific domain expertise in biotech. They've taken the traditional venture capital structure of investment and morphed it to make it appropriate for the biotech sector. I'd be happy to elaborate on that offline if you're interested. In addition to the venture capital, we've also developed the infrastructure to nurture startups in the region with spaces that are designed for their stages of development. I think a really interesting example is LabCentral. LabCentral opened in Cambridge about four years ago. It's the first biotech incubator that we're all aware of. It's a place where 20, and we're actually tripling the size of it next year, so it'll go up to about 60 or 70 biotech startups. What makes it useful for the biotech startups is they share laboratory space and they share equipment. So not only is that giving them some economic advantage in an early stage when creating those kind of resources could be capital intensive, but it creates an interesting network of all those biotech startups that I think is really quite powerful and creates very significant and serendipitous interactions. The Commonwealth of Massachusetts hasn't been sitting by idly either. They've made investments in infrastructure such as workforce training, shared facilities, they were one of the investors in the creation of LabCentral, and other economic development and grants and policies which support the industry. Last and certainly not least, the federal government investment in basic research, the impact of that cannot be understated, particularly in the early 2000s, the doubling of the NIH budget, which really just put the entire biotech research enterprise in Boston on steroids. And it's really created the resources that fuel the innovation ecosystem in our region. So life's all about timing and the timing was good in that regard. However, each of these by themselves is not sufficient. The parts have to interconnect. Seasoned initiatives from large firms need to move into a startup to provide unique skills and knowledge. Scientists from MIT and elsewhere need to collaborate with large companies and participate in founding startups. These same people must populate the economic development offices of Massachusetts and serve as advisors to the venture firms. Over time, we've built up an ecosystem by collaboration and collective contribution to the commons. The frictionless motion of ideas, people and capital are critical to the success of this ecosystem. Our situation is not unique as there are a number of examples of vibrant ecosystems, but from our perspective, they all share these common attributes. I mentioned earlier the network effect of collaborations by the Fairchild Semiconductor, Traderous 8, and the PayPal founders. We now see that dynamic very actively playing out in biotech and Kendall Square. The founding teams and key executives from Biogen, Genzyme, are going on to start all the newest biotech enterprises in Kendall Square. They're serving on the advisory boards of the venture capital firms and cultivating the next wave of leadership in the region. With all this exciting activity, what keeps us up at night? What trends do we see which are causing us to adapt our approach to innovation? I can share a few thoughts. These are thoughts that are more broadly about innovation than just specifically about biotech because we see the footprint of the innovation ecosystem expanding beyond biotech. First, the speed of innovation is increasing dramatically. We see this most clearly in software and social media where an idea can go to an app and then go to millions of users' smartphones in a month. But it's not just there. An inventor anywhere in the world can design a physical device, maybe a new Internet of Things device, and can have that device manufactured in volume after just a few months of prototyping in Genzyme. This is a result of the capacity that has been built in that region to do burst manufacturing of the newest smartphones or wearable devices. We can't have everything in our backyard. And in order to succeed, we need to build links to those ecosystems. And indeed, this is why MIT recently established an innovation node in Hong Kong as a portal to that manufacturing ecosystem in Shenzhen. We also have to develop new advanced manufacturing technologies to be printing that enable rapid, scalable manufacturing on a highly distributed means, which we believe is the future of production. Second, we need to maintain local production ecosystems to support innovation. MIT completed a study several years ago entitled The Production in the Innovation Economy, or PI study. The PI study was intended to answer one question. Is it critical to have production capacity nearby to enable innovation? Indeed, and our strong conclusion was that it's very important that the existence of production ecosystems feed off of the innovation process and vice versa. Indeed, this led us to work closely with the Obama Administration through the Advanced Manufacturing Partnership, which has led to investments in creating a network of manufacturing institutes in the United States. Just this past month, we opened a new Advanced Functional Fabrics Institute adjacent to MIT, which is leveraging some fabric technology, smart fabric technology that's come out of MIT, and we think this could be the next ecosystem for smart textiles, and we're very excited about that, particularly in the area of wearables. Third, we need to focus on how we support so-called hard tech innovation. Those things that require some disruptive new technology material or process. These types of new companies that are not well matched to the established venture capital model. They take a long time. They're capital intensive. And yet, these companies are the ones that give us some of the most, some of the greatest societal benefit by introducing new clean energy sources, early diagnostic tests, and new ways to supply clean water and abundant food, just to name a few. Today, these companies struggle to get off the ground. At MIT, we've been focused on this area, and in fact, we just this past year announced the formation of something we call the engine, which is a new venture that will provide support and address the gap that currently exists in the ecosystem for these types of enterprises. Fourth and connected to the third point, we see the need to drive new partnership models between universities, large companies, and startups. As I said earlier, it's never been easier to bring a new idea to market than through a startup, and this is increasingly the preferred path by which ideas leave MIT. In addition, we've seen a decline in the amount of internal innovation activities in large firms, in part significantly reduced their R&D activities. This has adversely impacted transfer of technologies from universities to large companies. What does this mean for innovation in large companies? Interestingly, there's been a very significant increase in the number of corporate venture capital firms, many being created by older established firms. These firms are beginning to look to startups as a source of innovation. We see this as a very exciting development. It does require corporations to restructure internally to leverage these innovation pipelines effectively in some firms struggle with this. However, we see strong synergies if large companies, startups, and research universities can work together to develop innovation pipelines, and so we think new university partnership models are needed to make this happen, and we're working on that. Lastly, coming back to the accelerating pace of innovation, we see a looming challenge in how these innovations get out of the market. The advances in machine learning, AI, Internet of Things, and robotics are bringing disruptive products to market faster than societies can think about how to adapt to them. I fear we will face, and we are facing regulatory and policy backlash that effectively will curtail the deployment of these technologies, particularly in more developed than nations. Increasingly, a country's competitive advantage could come from being most adept in establishing policy frameworks faster than others as a means to attract particular tech ecosystems. We're seeing that now in driverless technologies in where cities are going to make adjustments to their regulations to allow those technologies to be tested at scale. But consider new nuclear power technology. Developing these technologies in the U.S. is a significant challenge because of the structure of regulations in the nuclear industry and the way that established players in that regulatory framework. If another nation establishes a more innovation-friendly environment for these entities, they could become the dominant ecosystem for a new nuclear power industry as these new reactor technologies emerge. I believe that universities that are advancing these new technologies need to take a more early and active role in the discussions of the impact of these technologies so that responsible policies can be put in place. Let me close by saying that from our perspective, it's clear that vibrant ecosystems are critical to the process innovation. It is equally clear that these ecosystems need to dynamically evolve. We believe that they will evolve if all the stakeholders contribute to the commons and participate in this evolution. Lastly, I want to thank you for the opportunity to speak today.