Xconomy Q&A: Intellectual Ventures Co-founder and CTO Edward Jung

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EJ: China is one area. Asia in general. They really rode up the innovation curve quite quickly. Their innovators are mostly trapped in that they don’t have as many exits for their innovation as [innovators] have here in the states.

I had the very interesting experience of starting companies overseas. It’s a pain. It’s really hard. The first time somebody said you have to have this chop—literally like a stamp—and you have to put it in a safe, and the safe has to have an address, and people have to be able to visit you there. And I’m thinking, boy, when I was 14 years old, I incorporated in Delaware by mail. I think it cost me $35.

And you take a lot of personal liability for your company in a lot of Asian countries. They don’t have the same kind of incorporation and bankruptcy laws. So your ability to take risk is very low, which means there’s just, concomitantly with that, all sorts of things: less transparency in accounting, because people don’t want to tell you bad news; harder to actually start a company and a business; harder to export or import technologies—everything is harder.

But as a consequence, in some ways that’s good for my business, if bad for inventors in Asia. They have the ideas because they’ve got a great education system. They’re exposed to lots of interesting problems. They have the ability. They just don’t have the exits.

So, starting about 10 years ago [we] said, ‘Well, let’s give them an alternative exit.’ I knew that since 2004 there’d be a lot of venture capitalists and private equity pouring into those countries, because it’s kind of obvious, but I thought this is a case where I don’t have to be the fifth guy that showed up. I can be among the first to give them a different exit and a different way of thinking about how to do their inventions.

It has been a bonanza there, but it’s not going to stop there. It’s global. I went to a different conference where they were talking about building innovation ecosystems in places like Africa. And I talked to some very smart African inventors. And why are they good inventors? Because they see the problem right in front of them. It’s not just, ‘Oh, it’s clean water,’ but clean water in the following conditions that are constrained by the following environmental factors. Because they’re living there and they see it every day, so they’re actually better inventors than the superstars you could find at a Stanford or a Caltech looking at that problem.

X: How are U.S. universities doing on technology transfer and commercialization?

EJ: From the standpoint of the inventions that are produced there, and the capacity to produce inventions, they’re doing a very poor job. There are obviously standouts: Stanford and MIT, sometimes Columbia and a handful of universities do way better than your typical university, which has a tech transfer office that has done very few deals. On top of which, the incentives for a scientist, a researcher, or a professor to invent are sort of mixed.

We used to ask this question of how do you find a good inventor? What makes a good inventor? I haven’t mastered that yet, but I do know that you need people who can’t help but invent. They could be a postman and they’ll be inventing. They could be a professor and they’ll be inventing. And so, by and large, a lot of the great inventors you find at universities are those people. They just happen to be professors, in a way, but they’re inventors. And you’ll meet lots of great professors—top-notch educators, top-notch researchers—who aren’t inventors. But do the universities do a good job finding those inventors, and really taking care of them, and trying to do the best job they can to get their inventions out? No, not really. But having said that, they do a better job than say, Japan, so it depends on your point of view.

X: Turning to Intellectual Ventures itself, you’re out talking a lot about the company now and some of its new directions. But harking back to when you and your co-founders were setting it up, did you anticipate the kind of negativity that has been focused on the company through much of its existence?

EJ: No.

When we started the company—Nathan [Myhrvold]—and I, we’re coming out of Microsoft and we can do anything we want, really. And a lot of people—keeping in mind this is 1999, 2000—were saying, ‘Hey, become a venture capitalist or whatever.’ Didn’t want to be the 500th venture capitalist. And I thought venture capital was doing a good job of doing what it does. I wanted to do something different. Solving the big problems, whether it’s talking to guys like Bill [Gates] who were trying to put together the foundation and trying to figure out how to solve huge problems at global scale, or the big problems of agriculture, IT, and so forth—it seemed like that wasn’t getting fixed. So we really wanted to build something at scale that could help do that.

Now, keep in mind, back then, and even today, if you read a management text book, or you talk to a CEO, they all know we really need innovation. So we’re thinking great, if we focus on just that, I bet we can do a really good job. Because in almost every other organization, [innovation] is a side-effect of their business, right? It’s a side-effect of being a university. It’s a side-effect of being a corporation that does product.

So if you just did that, you focused on it, maybe we could get really good at it. Just like Microsoft got really good at software by focusing only on software. Before that it was mostly the side-effect of a hardware business.

So that was the concept, but boy, it turns out that you go and build that kind of capacity—and because you have both the desire to productize your inventions, and the desire to protect them, which is enforcement—somehow the enforcement gets blown way out of proportion and that becomes most of the narrative or the rhetoric about what your business is about.

At the same time, the very companies that are saying, ‘We really want innovation,’ it turns out it looks like they don’t really want it that much. Maybe what they do is they want innovation that they produce themselves, but it’s harder to partner for.

Now, I’m being very stereotypical. There’s lots of companies, especially small- and medium-size enterprises, who are very anxious and very eager to in-source innovation, very willing to partner. But by and large, the two ends of the spectrum—startups who kind of have to go it alone, because they’re all about trying to get a million times bigger, or multinationals, who maybe aren’t used to partnering very deeply because they got to be multinationals by being the big guys on the block—it’s very tough to work with them.

So it’s a little bit discouraging that they tend to see more downside than upside. Yes, it’s very surprising to me.

X: Has that negativity resulted in any operational difficulties for the company to this point? … Next Page »

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One response to “Xconomy Q&A: Intellectual Ventures Co-founder and CTO Edward Jung”

  1. Nobody says:

    Producing patents and enforcing them is very different, morally, with buying (junk) patents and enforcing them. Why not just be honest and say, this is part of what we do to make a living and we love to do it!