Government as Catalyst: Rethinking the Role of Government in Driving Innovation and Progress key lessons from Rory Sutherland's thought-provoking talk
Ghobash Ghobash
As a Strategic Transformation Advisor with 20+ years of experience, I excel in turning insights into systems that deliver actions.
In a fascinating talk filled with historical examples and economic insights, Rory Sutherland makes a compelling case that at times, active government involvement and even the creation of temporary monopolies can be the key to catalyzing transformative innovations that benefit society as a whole. As Sutherland puts it, "I think there are occasions when government can actually play an active and encouraging role in getting businesses started and off the ground much, much faster by actually, to some extent, intervening in the marketplace."
One powerful example Sutherland provides is the creation of the Penny Post in Britain in the 1800s. At the time, postal service was "effectively for rich people and for government people to actually share information." Recognizing the tremendous value that could be unlocked by making postal service affordable for the masses, reformer Roland Hill, with critical mathematical insights from Charles Babbage, launched the Penny Post - enabling people to send letters anywhere in Britain for just one penny.
Crucially, as Sutherland explains, this idea "only works at a certain scale" and "kind of requires it to be a monopoly" in its early days to reach the necessary volumes. In fact, "for the first few years, it basically lost money. They had faith in the idea, they had faith in the mathematics. Eventually it paid off." Had the Penny Post been opened up to full competition from the start, Sutherland argues it may have taken 25 years, rather than 4-5, to become profitable and deliver its revolutionary benefits.
Sutherland calls these "network goods" - innovations like postal networks, rail systems, or even digital platforms that are "anti-rivalrous." That is, the more people who use them, the better and more valuable they become. The challenge is that network goods "don't work at first, they don't work unless they have a certain amount of scale." This is where Sutherland believes governments have a crucial role to play - granting limited-term monopolies to accelerate these innovations to critical mass.
Far from an outdated, centrally-planned approach, Sutherland contends this model of "government as impresario" is well-suited for catalyzing progress in the information age. He envisions great potential in areas like shared health data networks, optimized marketing and consumption data, and solving coordination problems like creating a nationwide locker network for efficient deliveries.
The common thread is having government proactively create "common pool network resources," with "profits going towards the government" and "some accountability to the electorate and to the customer, not only to the corporate provider." Done right, Sutherland believes this approach can spur important innovations that are difficult to get off the ground through free market forces alone.
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Ultimately, Sutherland laments that in today's political environment, "we live in a time of such simplicity" where the range of government actions being considered "are ludicrously constrained." His core message is that by intelligently intervening to establish the foundations for new network goods, government can be a powerful catalyst for innovations that enrich society as a whole. As he puts it, "government, when well-directed, can just make life a lot better and nicer quite easily, if it does it intelligently and if it knows when to get out of the way and when to intervene."
You can enjoy the full talk on Youtube by following this link
You can reach Rory Sutherland on LinkedIn here