Brian Kenny:
From the moment your alarm sounds in the morning to the moment you put your smartphone on the nightstand, almost everything you do throughout the day involves one thing, a silicon chip. Your kitchen appliances, TVs and tablets, your treadmill, your ride to work, the office equipment you use. All of these things are powered by wafer-thin integrated circuits called chips. They’re more than just important. Silicon chips are the bedrock of modern civilization. They drive technological progress, economic growth, and global connectivity. The sector was worth 528 billion in 2023 and is expected to grow to a trillion by 2030. The supply chain highlights the interconnectedness and liabilities of the global economy. Simply put, if the flow of silicon chips were to dry up tomorrow, our lives would change drastically and not for the better. Today on Cold Call, we welcome Professor Mitch Weiss to discuss his case, “CHIPS Program Office.” I’m your host, Brian Kenny, and you’re listening to Cold Call on the HBR Podcast Network. That’s my best broadcaster voice. What do you think?
Mitch Weiss:
That’s really good.
Brian Kenny:
Yeah, thank you.
Mitch Weiss:
I’m impressed. That was seamless.
Brian Kenny:
Mitch Weiss studies digital transformation and innovation ecosystems, and he’s an expert on public entrepreneurship. He even wrote a book about it called, We The Possibility: Harnessing Public Entrepreneurship to Solve Our Most Urgent Problems. Mitch, welcome back to Cold Call.
Mitch Weiss:
Thank you for having me back.
Brian Kenny:
And today we’re going to talk about something that I think many people, probably they’ve heard about silicon chips. They know they’re important. They know it’s a big industry. They probably don’t really have any deep understanding about just how important these things are and just how vulnerable that makes us. This will be an interesting conversation, so thanks for being here to talk about it. Let me ask you to start by telling us what the central issue is in the case and what your cold call is when you start the discussion.
Mitch Weiss:
Well, the central issue is going to seem a little bit small given how giant the case is and how giant the program is. The case is about this $39 billion-dollar government startup, the effort by the US government to invest monies in semiconductor manufacturing capacity in the United States. A desperate race to get that money out the door into these companies and make sure, to your point, that we assure the constant supply of innovative chips here in the United States. And it’s about that effort and the office stood up to make that happen.
The central issue in the case is about whether or not, as this CHIPS Program office endeavors to hear about interest in these monies and then give them out, they should so-called “invite pre-applications” to their application process. The idea was, well, why don’t we first hear from potential companies, maybe 50 pages or less about their interest in getting access to some of these funds.
And then we’ll let them know whether that sounds really likely they’ll get money, or maybe less likely they’ll get money and either steer them towards applying or towards applying better or towards not applying at all. A very unusual structure for a program like this to give out so much government taxpayer money.
Brian Kenny:
Yeah. How did you hear about this? Why’d you decide to write about it?
Mitch Weiss:
Well, I decided to write about it, first, because it’s a $39 billion startup, and I studied government startups. It’s a massive entrepreneurial effort inside government. It’s interesting from that perspective. I had read Chip War by Chris Miller, a fascinating account both of technology and entrepreneurship and geopolitics. I was, as you intimated, very aware of just how reliant we were on these and how much the politics and availability of chips would come to shape the world.
I was also really, really fascinated, and this is where I really go with the case about the question of risk-taking in government and about what risk government should take and about this tradeoff between basically giving out money to entities perhaps who didn’t deserve it or not giving up money to entities who do deserve it, and how do you navigate both those different risks? It’s actually a much more generalizable question for lots of government efforts and lots of firms, which is how do we balance errors of omission, errors of commission?
I forgot to mention the cold call, the class starts not on the small question of pre-application, but the cold call is simply the US government is going to give out $39 billion of taxpayer money to enable more semiconductor manufacturing in the United States, they hope. Does that seem like a good idea?
Brian Kenny:
Great. Let’s talk about the CHIPS and Science Act as it’s called. What’s the motivation behind that? Why do they exist?
Mitch Weiss:
Well, the US government in a bipartisan fashion, although not a unanimous fashion whatsoever, agreed that we need to advance as a country certainly around semiconductor, semiconductor manufacturing, semiconductor innovation, but also along many other scientific and technological fronts. The CHIPS and Science Act provided money to invest behind that manufacturing capacity behind that R&D, behind a whole host of education around STEM topics and otherwise on issues that ranged, yes, from semiconductors and chips, but also to artificial intelligence and quantum computing.
Within the CHIPS and Science Act, that was like a $280 billion authorization, although not all that money had been appropriated. It’s important to say that even still to this day, the US government hasn’t actually made all that money available, but what they did authorize and appropriate was $38 billion to invest behind semiconductor manufacturing.
The motivation, which was to make sure that we had availability to chips and that we were continuing to innovate and manufacture some of the most advanced chips.
Brian Kenny:
Was some of the sense of urgency around this that come out of COVID when we saw about supply chain interruptions and the significance of those?
Mitch Weiss:
Absolutely. People were having a hard time getting cars, having a hard time getting medical equipment. It was making things unavailable. It was also making things more costly. I think that was definitely an awakening for people in government and also for the American public about just how reliant we were on chips and about how many of them were actually made abroad. The Secretary of Commerce, Gina Raimondo, who’s the protagonist in the case, the US Secretary of Commerce, she and others would remind us that we had once in the United States manufactured basically all the world’s chips.
We invented them that in 1990, I think that we had been producing, say, 37 percent of global capacity for chips, and by 2022, so height of COVID and things, we had declined to 12 percent of the production. She says, “We once manufactured all the world’s advanced chips, and today we manufacture almost none of the actual advanced chips.”
So, these vulnerabilities were alerted to us during COVID, to the minds of the folks that passed these bills and made these monies available persisted even after COVID.
Brian Kenny:
Why the huge decline in manufacturing in the US?
Mitch Weiss:
Well, there are a lot of factors. Some of it was strategic. It was the US became really, really, really proficient at designing these chips and it made sense to produce chips elsewhere. Think about all the other things we design here and produce elsewhere, the cost of labor, the engineering proficiency, the cost of the manufacturing equipment, all the rest of it. What happened to the semiconductor supply chain was it became massively globalized. There are pieces you get all around the world. A lot of it’s assembled in Taiwan, and we were still doing lots of designing, but just lots of less manufacturing.
One reason was strategic, do what you’re good at. There were other reasons. Certainly other countries had made huge investments. Their governments had made large investments in making sure that they could manufacture semiconductors, and so there were government benefits in other place. And so, that was helping drive the cost down as well. And so, that was driving manufacturing to those places.
There was entrepreneurship that had started here that was happening other places as well. It became much more globalized chip manufacturing, and I would say mostly until COVID, people didn’t really think that was even a bad thing. Globalization seemed like a really good thing. Not COVID-related, but also I think raised quite a bit in terms of its saliency in the last couple of years was what this also meant from a national security standpoint. What does it mean if all these other countries are the ones manufacturing your most advanced chips?
What does it mean if those chips are the ones that are supposed to go into your defense systems? What does it mean if one of those countries is China? What does it mean if one of those countries is China and is thinking about what it might do vis-a-vis Taiwan? It became a point of concern for those in the US government.
And then, the question was, well, what do we do about it, if that’s a problem, i.e., the globalization of the chip supply chain, are government-funded efforts the solution?
Brian Kenny:
In the intro, I teased about the ways that we are using chips that we’re not even aware of for our alarm clocks and our coffee makers. But it gets more serious very quickly when you look at the financial services industry or medical systems that we use in this country. And you just mentioned national defense. Just how important are semiconductors in the whole national defense effort?
Mitch Weiss:
They’re in everything. And the irony is that in a way the semiconductor industry in the United States came about because of early innovation with the defensive sector. They’ve been part and parcel of our defense apparatus for decades now. In fact, this book by Chris Miller, Chip War, starts out with, in a way, the space race between the US and the USSR. And chips were a big part of that tracing back from the early days. And these days, of course, they’re in everything. And yeah, it’s not just defense, as you mentioned. It’s all the other sectors. They just become integral parts of our lives. He points out in the book, for example, that basically all the advanced chips in your iPhone are made in a single plant, owned by TSMC in Taiwan.
Brian Kenny:
That sounds crazy.
Mitch Weiss:
Yeah, it’s changing now. It’s changing now. And besides the geopolitical fissures that exist, there’s also actual ones. He writes about, and we know about the fact that much of the world’s chip manufacturing capacity sits nearby earthquake-prone zones. So, a human-made disaster or a natural disaster, any of those things could take out huge amounts of chip capacity and really disrupt life as we know it.
Brian Kenny:
Where does most of the R & D happen? Is the US still heavily engaged in the R & D around this technology?
Mitch Weiss:
Yes. The US is still heavily engaged in the R & D, and I shouldn’t say increasingly now because of chips and things that preceded chips doing now more of the manufacturing. A lot of the R & D still happens here. There are firms, many firms in the United States that are essentially, they’re called fabless firms. They’re firms that design chips but don’t make them. And then, there are firms called foundries, the places that make chips but don’t design them. We have some foundries now, but we have lots of fabless firms. We have lots of fascinating chip design.
And we also do other things. If you think about the whole chip supply chain, a lot of the R&D is not just about the chip, but it’s also about the manufacturing of the chip. How do you design machines to make smaller and smaller and smaller and really, really, really small chips?
Brian Kenny:
Teeny tiny chips.
Mitch Weiss:
Yeah, we do a lot of the R&D, but I think the epiphany people had was during COVID economically and also with the geopolitics as it is that doing the R&D but not the manufacturing wasn’t going to be enough.
Brian Kenny:
Let’s go back to the central issue as you defined it in the case, this pre-application process, why is that so revolutionary and what are they hoping to achieve by doing it?
Mitch Weiss:
It’s revolutionary, that might be a strong word, but it’s revolutionary in the sense of, imagine most government grant processes, even if you’re not steeped in all of this, mostly what happens is there’s some notice of funding opportunity. Here, they call it a NOFO or some request for proposals, an RFP or some other bit of paperwork that the government sends out. And it’s long, and then you fill it out. And if you’re a company, you get a bunch of engineers and lawyers and consultants to help you fill it out. And then, you send it to them.
And then, they sit in some… They all joke, but they sit in some smoke-filled room even though people don’t smoke inside anymore. And then, later on they tell you who got the money or who didn’t. That was the way it worked. And in part, that almost makes some sense because it seems very structured, very rule-based, very rigorous. And it seems like in a process like that, while it’s opaque that it’s standardized and isn’t that what we want in government, is something that’s standardized.
Because then there wasn’t the space for bad things to happen, fraud, corruption, otherwise. Well, the problem with that is it is actually very, very opaque. It’s not very inviting to firms, especially new firms who might be new into the semiconductor space. It also doesn’t give a lot of visibility to the people who have to give this money out or loan this money out or grant this money out, what applications are coming.
So, part of the motivation was, well, don’t we want to have a process that actually be much more iterative, much more discussive, much more communicative? Don’t we actually want to be able to have a back-and-forth with these companies about what they’re planning, whether we would fund it? Maybe if they planned X instead, we could maybe have more confidence in it. The way the rest of us humans work, most of the time we’re engaged in business transactions, it’s like, why don’t we have it back-and-forth?
So, they did it in order to have a much more iterative process to learn much faster, to be more inviting to potential applicants. Well, that’s at least why they were considering it at the time of the case was maybe if we had a pre-application, people could put their toe in the water, their foot in the water, get halfway through the door, get some feedback from us, and we could bring a much more discussive process.
Brian Kenny:
So, do you think that a process like this, I mean, is it fair to say that this would make it more welcoming for more innovative firms, maybe smaller firms to participate where otherwise they don’t have the resources to put together in the old form anyway?
Mitch Weiss:
That was absolutely the hypothesis that the folks in the CHIPS Program Office had, whether it was Mike Schmidt who ran the office, Todd Fisher who ran the investment stuff, Morgan Dwyer, who was head on the policy, strategy side, that was the hypothesis they had. This would make it more inviting. They also believed it would ultimately make the application stronger, not just more people and more different people would apply. But that also, we would get stronger applications eventually because we could have given them some indications along the way of what would work, what would we welcome.
Brian Kenny:
And you’re putting an awful lot of pressure on the office itself to write an RFP or-
Mitch Weiss:
A NOFO in this case they call it.
Brian Kenny:
A NOFO that is so comprehensive that it answers every single question that a potential applicant might have.
Mitch Weiss:
And they always had other processes for answering questions. And you ask us the question, we tell the whole world what the questions were asked, but it was all very rigid and bureaucratic, and this was meant to be more iterative, a lot more learning, a lot more agile, a lot more flexible. So, the hypothesis was we get more applicants, we get better applications. We have more visibility into the applications we were getting as we began to judge them. And that would help us shape both our evaluations and the future NOFOs for future rounds of funding.
Brian Kenny:
Is there a lot of public, private interaction in the semiconductor space? Are there a lot of initiatives that are happening that involve both private firms and the government?
Mitch Weiss:
There was a meaningful overlap. If you think about it, of course, the government was a huge, as we talked about in the defense context, a huge user of semiconductors, has a big interest in that, that extends not just from the federal government. But if you look at state and local governments, semiconductor manufacturing in certain regions was still of interest to people. So, there was meaningful amounts of engagement. But I would say that post this era, there was much more substantial engagement between the government and the leaders of these companies, whether they were fabless firms or whether they were the CEOs of the new foundries or whether they were leaders inside the industries that need access to these chips.
There has been much more engagement now between those two sectors, I think, than there was before.
Brian Kenny:
Yeah, the case does dive into some of the risk mitigation factors that they put in place, that $39 billion is a lot of taxpayer money. What are they doing to ensure that it’s being spent in an appropriate way?
Mitch Weiss:
The way they actually set up their whole shop at CHIPs, the whole office in a way is some risk mitigation effort in terms of bringing in super talented people who had experienced both the national security industry and the semiconductor industry and from the world of finance so they could actually evaluate these things in a sophisticated way. You got the evaluation process as a risk mitigator. You’ve got talent as a risk mitigator. You got all oversight from other entities as risk mitigation.
You also had some other provisions they were debating as I write in the case that they were debating in terms of the NOFO and the overall process. So, for example, milestone payments, they don’t give all the money out at once. They make it available in milestones to the companies that have been granted it if they meet certain commitments they had in terms of capacity and build-out and all the rest. So, milestones is a key thing.
They actually had upside sharing provision in this process. So, there’s a big information asymmetry. Of course, the firm knows what they think it’s going to cost to build a foundry and also what they think they’re going to make when they sell chips. This government now is quite sophisticated on this front, but has less of that information.
And there might be the tendency by companies to way undersell how much profit they’re going to make so that they can say, “We’re desperate for government funding.” And so, they put a provision in there that says, “Look, we’re not trying to make money off this deal. We really want to get chip capacity in this country, but if it turns out you way undertold us what the profits going to be, we are going to get some of that,” just to try to really invite people to be quite candid about their business models.
And so, that was another key risk mitigation technique. But the big riddle that these bags… Well, two big riddles, Brian, is one is like, well, what is the right level of risk? Is it zero? Is it something more than zero? And the second thing is like, well, when you say risk, well, again, which risks are we talking about? Because there’s at least two giant risks here. And one is that we invest in plants we shouldn’t have that it was technologies we didn’t need, or there was oversupply, or it turns out the company couldn’t actually deliver what they said they could. That would be like a waste of taxpayer money. That’s a serious risk.
There’s another risk, which is we don’t invest in the plants that we do need. We don’t invest in the technologies that we do need. And we don’t have our phones or our cars or our medical devices or our defense apparatus. So, when you say, how are we managing risk, you’re really actually trying to think about both those risks. And that’s a really, really important line to find.
Brian Kenny:
I’m curious. You’ve spent a fair amount of time in government in your career. How do you attract that talent to a government job? I’m guessing these people could probably make a lot more money in the private sector. What draws them to something like this?
Mitch Weiss:
Mission. There are folks who would disagree who would say this chip thing is overblown and we have enough capacity, and the global markets work themselves out, et cetera, et cetera. So, I want to acknowledge that. But let’s say you do agree with the thesis of the CHIPs and Science Act, the purpose of the CHIPS Program Office, the rationale for these funds, which is United States, absolutely, absolutely, for its national security purposes, not to mention its economic ones, needs access to advanced semiconductor R&D, but in this case, manufacturing, come be a part of that. Come be a part of making that happen.
Mission is what attracts folks to this. And then, give them the discretion and the agency to make a difference. This is where a little bit of the pre-app riddle comes back, which is like you can invite people in to be part of really important mission, but if all they are are box checkers on an RFP, they’re going to be like, “Why am I here?” But if you’re really inviting them to use their brain and their experience and say, “Gosh, is this the firm? Is that the firm? Is this the right amount? Is that the right amount?”
How do we marry up our… Again, making sure this is prudent financially, but also that achieves our national security objectives. Those are tough questions. If you invite in people to a giant mission and give them tough questions to work on, they’ll be excited to come and stay.
Brian Kenny:
I would imagine also the pre-applications here, maybe in an unintended way is creating a body of knowledge within the CHIPs office about technologies, innovative approaches to solving these problems that otherwise they probably wouldn’t have access to.
Mitch Weiss:
Yeah, they’re a very sophisticated bunch, and some of them came from the industry, and they certainly have lots of ways of reaching out and getting information. So, they’re quite informed, and they’re also quite careful by the way about making sure that information that came in from one company doesn’t leak to a team that’s working on a different company.
Brian Kenny:
I hope so.
Mitch Weiss:
But the pre-apps do help them get a sense for what the interest is out in the marketplace for these government supports. In addition, they were contemplating something interesting when they wrote the case, which was rolling applications so that it wasn’t like there was one deadline. All the things came in and they were all compared against each other, but in fact, submit your stuff when it’s ready. And in this way, they were also mitigating some in a way technological risk, which is, we’ll invest some now, but we’ll keep some as new technologies present themselves, a new manufacturing capacity presents itself. That, of course, added to another riddle, which is, well, how fast do we put out this money?
Brian Kenny:
How does the US compare to other countries where it comes to these partnerships in the semiconductor space? Are we unique?
Mitch Weiss:
No, we’re not unique. I think that some of the design here on the CHIPS Program Office quite unique. And I think the fact that they’ve attracted really serious talent into this office is somewhat new for them. But many other countries and regions have passed similar bills, stood up similar efforts out of similar sets of concerns. And so, the EU has a Chips Act. Japan has money that goes into this. Certainly China has put billions of dollars into these efforts. And so, we’re not alone in all of this, which raises a whole other set of questions, which is like, well, if all the governments are putting money into this, then what’s the point of any government putting money into it?
Brian Kenny:
Yeah. Well, let’s talk about that for a second because I’m sure they’ve been into this for a couple of years now, two or three years. How’s it going? What are the critics? What are the bumps that they’ve encountered along the way?
Mitch Weiss:
The first NOFO, Chips NOFO went out in the early part of 2023, so it’s really only been about a year. Without spoiling too too much of the case, I would say that there’s this constant riddle about how fast should we get the money out. Again, this is balancing the risk. If it’s too slow, then we might lose the race for chip independence. If it’s too fast, we might give money out in ways that were imprudent. So, how do you think about the pacing? And so, you could absolutely find over last year, people who would say, “You’re not moving fast enough. Why haven’t you put the money out fast enough?” I will say that over the last couple of months, there have been some major, major announcements, many billion dollar announcements to some of the major manufacturers to do chip manufacturing in the United States, and that’s one indication that this process is rolling. In addition, what the CHIPs folks would tell you is there were also commitments that companies made ahead of the government saying they were putting the money out the door, but as the government said that money would be available, that induced chip manufacturing capacity to start, capacity start coming online. They would tell you there has already been an impact from the bill, even before the money from the bill went out the door.
Brian Kenny:
So, it’s a little bit of a cart-horse thing, right? The manufacturers aren’t going to start to rev things up until they know they’ve got some of that money.
Mitch Weiss:
Well, no, it’s like the opposite. It’s like the manufacturers, because it takes so long, are going to rev things up even before they have the money, hoping that they will get some of the money and that their revving up will invite some of that money their direction. There’s already been progress, announcements and other things in Arizona, in New York, otherwise down this road. There’s always this push-pull about how fast, how slow. But suffice to say that even before the money was going out the door, there was activity and now we’re seeing more.
Brian Kenny:
I’m going to ask you to prognosticate a little bit. I know faculty love to predict the future, but I’m wondering what would success look like for the Chips and Science Act five years from now?
Mitch Weiss:
Good news. First of all, I don’t have to prognosticate. The interesting thing is that Secretary Raimondo, when they announced the bill, and then they announced the crafting of the CHIPS Program Office, which I write about in the case, she says, “We’re going to be judged on two things years from now.” She says, “We’re going to be judged on basically two imperatives.” She says, “One, is whether this program, these monies enable us to build a reliable and reliant, reliable and reliant semiconductor industry that protects America’s technological leadership for the coming decades.”
So, there she’s talking about, will we have the advanced manufacturing capacity and the advanced R&D so that we’re designing still and producing the most advanced chips in the world so we could have our national security preserved and our technological innovation frontier advanced? That’s judgment number one. Did we achieve that? And the second thing she says is, we’re going to be judged on whether we were good stewards of taxpayer money. That’s judgment number two.
Hanging over their heads is this whole Solyndra escapade, which was one of the companies that was funded during the Obama administration when they were doing energy loans and grants. Everybody remembers this one firm, which got $500-plus million and then went bankrupt. And so, oh my God, that was a terrible episode of government funding. People forget that the government may have profited some 5 to 6 billion on that portfolio. People forget things like Tesla got loan guarantees out of that effort, but they all remembered the one thing that went poorly.
I guess if I was thinking about how this will be judged, it’s her two criteria, which are, do we have technological independence and innovation. On the one hand, have we been basically prudent with the taxpayer money on the other? But I would maybe add a third, which is, have we done it in such a way that we’ve built confidence and awareness in the American public that we can invest money like this, that even though it won’t all go perfectly, that on balance, it’s an important way to support the strategic imperatives of the United States.
And it’ll be a success if we have the tech piece, if we have the fiscal piece. The American public will have to come and understand that when you make investments like this, you’re not going to have a 100 percent success rate. That would be, in a way, it would be minimizing the taxpayer risk, but maximizing the national security risk. And that seems like an odd balance.
Brian Kenny:
And just to be clear, the goal here is not necessarily to ensure that all the chips that we’re using in our devices are produced in the United States by American firms. That would be unattainable, I would think.
Mitch Weiss:
No, that’s not the goal whatsoever. It’s to make sure that we have access to the chips that we need. It’s to make sure that there’s some diversity in the supply chain. By the way, this group is working with partners around the world to see what they’re doing in their countries and to see how we can have a truly global supply chain. The goal is not to make it all here. The goal is just to make sure that we make enough of it here, that we have resilience and that we have plenty of innovation.
And again, I write this in the case, I want to acknowledge it here. There are plenty of people who think those are important goals, but that doesn’t mean the government should be spending public money on it. In the case, I talk about the people who think this is corporate welfare and who think these companies that ultimately have these monies don’t need it and et cetera, et cetera. And so, one of the things we have a discussion about in the class is, as I mentioned the cold call, it’s like, “Is this a good idea?”
Brian Kenny:
How does this fit with your definition of public entrepreneurship? Is this in the spectrum?
Mitch Weiss:
Absolutely. I’m always interested in basically possibility government doing things that haven’t been done before. And so, by nature, they’re probably not going to work, but they possibly might, in a way of putting out money that hasn’t precisely been done before. I’m fascinated in them being willing to try a new approach. The other thing I’m really fascinated in, and this is where a lot of my research is in these days, and ultimately I think a second book, is what are the systems in governments that enable or disenable innovation, the underlying systems?
My earlier work was about the tactics that you can use, but the fundamental systems and those systems are procurement, budget, to your question, talent, but also the accountability systems in government. What do we hold people accountable for? When you think about public entrepreneurship, you really want to make sure that, of course, we’re holding people accountable for the errors they make, errors of commission essentially.
But if you want real invention, you have to hold people accountable for basically not trying things also. We need people to basically be inventive and creative. And I’ve been playing around with a lot of ideas about how we would get that in the government. The thought experiment I give at the end of this case, it’s not in the case, but when we teach it is all over the Department of Commerce, which is where the CHIPS Program Office sits. There are posters, signs.
You can see them online if you Google them from the Inspector General of the Department of Commerce, which basically says, “Look, report waste from fraud and abuse.” And you totally, we desperately need people reporting waste from fraud and abuse… there’s this thought experiment I run, which is what if there was a second sign and then there was a second group of people, let’s call them “possibility generals” for right now, but that’s a little too cute.
But the second sign says, “report waste from timidity and weakness,” but you can also waste by not doing. This fits into public entrepreneurship because it’s all about this balance between doing, not doing which errors. It was square and all this stuff I study, and getting to know these folks and watching some of their work and still watching it now has been absolutely fascinating to me.
Brian Kenny:
Mitch, this has been a great conversation. It always is when we get together, so thanks for being here. One last question. If we could close out just by telling us what you’d like listeners to remember about the CHIPS case.
Mitch Weiss:
I think if listeners are interested in chips, especially in government efforts to engage in industrial policy, which is a big debate these days for the US government, should other governments be getting back into this business, I’d like them to really think about risk as being not just the risk of taxpayer money getting spent on a plant that it shouldn’t have, but the risk of taxpayer money not getting spent on a plant that it should have. You really got to get your mind around there’s both those risks.
And for our listeners who are maybe interested in chips, but also think more broadly, I think that raises this other riddle that all leaders can think about all the time in other organizations, which is in every situation you have the errors of commission people can make, doing things they shouldn’t have, and the errors of omission they can make, not doing things they should have. And in any situation you’re presented with, you always have both those risks.
You have to think about as a leader, “What’s your appetite for either kind of those risks?” If you had to tradeoff between the two, where would you tradeoff between the two and what efforts can you make to minimize both? And those are the efforts we see the CHIPS Program Office wrestling with in this case.
Brian Kenny:
Mitch, thanks for being on Cold Call.
Mitch Weiss:
Thank you.
Brian Kenny:
If you enjoy Cold Call, you might like our other podcasts, After Hours, Climate Rising, Deep Purpose, IdeaCast, Managing the Future of Work, Skydeck, Think Big, Buy Small, and Women at Work, find them on Apple, Spotify, or wherever you listen. And if you could take a minute to rate and review us, we’d be grateful. If you have any suggestions or just want to say hello, we want to hear from you, email us at coldcall@hbs.edu. Thanks again for joining us, I’m your host Brian Kenny, and you’ve been listening to Cold Call, an official podcast of Harvard Business School and part of the HBR Podcast Network.
Brian Kenny:
From the moment your alarm sounds in the morning to the moment you put your smartphone on the nightstand, almost everything you do throughout the day involves one thing, a silicon chip. Your kitchen appliances, TVs and tablets, your treadmill, your ride to work, the office equipment you use. All of these things are powered by wafer-thin integrated circuits called chips. They’re more than just important. Silicon chips are the bedrock of modern civilization. They drive technological progress, economic growth, and global connectivity. The sector was worth 528 billion in 2023 and is expected to grow to a trillion by 2030. The supply chain highlights the interconnectedness and liabilities of the global economy. Simply put, if the flow of silicon chips were to dry up tomorrow, our lives would change drastically and not for the better. Today on Cold Call, we welcome Professor Mitch Weiss to discuss his case, “CHIPS Program Office.” I’m your host, Brian Kenny, and you’re listening to Cold Call on the HBR Podcast Network. That’s my best broadcaster voice. What do you think?
Mitch Weiss:
That’s really good.
Brian Kenny:
Yeah, thank you.
Mitch Weiss:
I’m impressed. That was seamless.
Brian Kenny:
Mitch Weiss studies digital transformation and innovation ecosystems, and he’s an expert on public entrepreneurship. He even wrote a book about it called, We The Possibility: Harnessing Public Entrepreneurship to Solve Our Most Urgent Problems. Mitch, welcome back to Cold Call.
Mitch Weiss:
Thank you for having me back.
Brian Kenny:
And today we’re going to talk about something that I think many people, probably they’ve heard about silicon chips. They know they’re important. They know it’s a big industry. They probably don’t really have any deep understanding about just how important these things are and just how vulnerable that makes us. This will be an interesting conversation, so thanks for being here to talk about it. Let me ask you to start by telling us what the central issue is in the case and what your cold call is when you start the discussion.
Mitch Weiss:
Well, the central issue is going to seem a little bit small given how giant the case is and how giant the program is. The case is about this $39 billion-dollar government startup, the effort by the US government to invest monies in semiconductor manufacturing capacity in the United States. A desperate race to get that money out the door into these companies and make sure, to your point, that we assure the constant supply of innovative chips here in the United States. And it’s about that effort and the office stood up to make that happen.
The central issue in the case is about whether or not, as this CHIPS Program office endeavors to hear about interest in these monies and then give them out, they should so-called “invite pre-applications” to their application process. The idea was, well, why don’t we first hear from potential companies, maybe 50 pages or less about their interest in getting access to some of these funds.
And then we’ll let them know whether that sounds really likely they’ll get money, or maybe less likely they’ll get money and either steer them towards applying or towards applying better or towards not applying at all. A very unusual structure for a program like this to give out so much government taxpayer money.
Brian Kenny:
Yeah. How did you hear about this? Why’d you decide to write about it?
Mitch Weiss:
Well, I decided to write about it, first, because it’s a $39 billion startup, and I studied government startups. It’s a massive entrepreneurial effort inside government. It’s interesting from that perspective. I had read Chip War by Chris Miller, a fascinating account both of technology and entrepreneurship and geopolitics. I was, as you intimated, very aware of just how reliant we were on these and how much the politics and availability of chips would come to shape the world.
I was also really, really fascinated, and this is where I really go with the case about the question of risk-taking in government and about what risk government should take and about this tradeoff between basically giving out money to entities perhaps who didn’t deserve it or not giving up money to entities who do deserve it, and how do you navigate both those different risks? It’s actually a much more generalizable question for lots of government efforts and lots of firms, which is how do we balance errors of omission, errors of commission?
I forgot to mention the cold call, the class starts not on the small question of pre-application, but the cold call is simply the US government is going to give out $39 billion of taxpayer money to enable more semiconductor manufacturing in the United States, they hope. Does that seem like a good idea?
Brian Kenny:
Great. Let’s talk about the CHIPS and Science Act as it’s called. What’s the motivation behind that? Why do they exist?
Mitch Weiss:
Well, the US government in a bipartisan fashion, although not a unanimous fashion whatsoever, agreed that we need to advance as a country certainly around semiconductor, semiconductor manufacturing, semiconductor innovation, but also along many other scientific and technological fronts. The CHIPS and Science Act provided money to invest behind that manufacturing capacity behind that R&D, behind a whole host of education around STEM topics and otherwise on issues that ranged, yes, from semiconductors and chips, but also to artificial intelligence and quantum computing.
Within the CHIPS and Science Act, that was like a $280 billion authorization, although not all that money had been appropriated. It’s important to say that even still to this day, the US government hasn’t actually made all that money available, but what they did authorize and appropriate was $38 billion to invest behind semiconductor manufacturing.
The motivation, which was to make sure that we had availability to chips and that we were continuing to innovate and manufacture some of the most advanced chips.
Brian Kenny:
Was some of the sense of urgency around this that come out of COVID when we saw about supply chain interruptions and the significance of those?
Mitch Weiss:
Absolutely. People were having a hard time getting cars, having a hard time getting medical equipment. It was making things unavailable. It was also making things more costly. I think that was definitely an awakening for people in government and also for the American public about just how reliant we were on chips and about how many of them were actually made abroad. The Secretary of Commerce, Gina Raimondo, who’s the protagonist in the case, the US Secretary of Commerce, she and others would remind us that we had once in the United States manufactured basically all the world’s chips.
We invented them that in 1990, I think that we had been producing, say, 37 percent of global capacity for chips, and by 2022, so height of COVID and things, we had declined to 12 percent of the production. She says, “We once manufactured all the world’s advanced chips, and today we manufacture almost none of the actual advanced chips.”
So, these vulnerabilities were alerted to us during COVID, to the minds of the folks that passed these bills and made these monies available persisted even after COVID.
Brian Kenny:
Why the huge decline in manufacturing in the US?
Mitch Weiss:
Well, there are a lot of factors. Some of it was strategic. It was the US became really, really, really proficient at designing these chips and it made sense to produce chips elsewhere. Think about all the other things we design here and produce elsewhere, the cost of labor, the engineering proficiency, the cost of the manufacturing equipment, all the rest of it. What happened to the semiconductor supply chain was it became massively globalized. There are pieces you get all around the world. A lot of it’s assembled in Taiwan, and we were still doing lots of designing, but just lots of less manufacturing.
One reason was strategic, do what you’re good at. There were other reasons. Certainly other countries had made huge investments. Their governments had made large investments in making sure that they could manufacture semiconductors, and so there were government benefits in other place. And so, that was helping drive the cost down as well. And so, that was driving manufacturing to those places.
There was entrepreneurship that had started here that was happening other places as well. It became much more globalized chip manufacturing, and I would say mostly until COVID, people didn’t really think that was even a bad thing. Globalization seemed like a really good thing. Not COVID-related, but also I think raised quite a bit in terms of its saliency in the last couple of years was what this also meant from a national security standpoint. What does it mean if all these other countries are the ones manufacturing your most advanced chips?
What does it mean if those chips are the ones that are supposed to go into your defense systems? What does it mean if one of those countries is China? What does it mean if one of those countries is China and is thinking about what it might do vis-a-vis Taiwan? It became a point of concern for those in the US government.
And then, the question was, well, what do we do about it, if that’s a problem, i.e., the globalization of the chip supply chain, are government-funded efforts the solution?
Brian Kenny:
In the intro, I teased about the ways that we are using chips that we’re not even aware of for our alarm clocks and our coffee makers. But it gets more serious very quickly when you look at the financial services industry or medical systems that we use in this country. And you just mentioned national defense. Just how important are semiconductors in the whole national defense effort?
Mitch Weiss:
They’re in everything. And the irony is that in a way the semiconductor industry in the United States came about because of early innovation with the defensive sector. They’ve been part and parcel of our defense apparatus for decades now. In fact, this book by Chris Miller, Chip War, starts out with, in a way, the space race between the US and the USSR. And chips were a big part of that tracing back from the early days. And these days, of course, they’re in everything. And yeah, it’s not just defense, as you mentioned. It’s all the other sectors. They just become integral parts of our lives. He points out in the book, for example, that basically all the advanced chips in your iPhone are made in a single plant, owned by TSMC in Taiwan.
Brian Kenny:
That sounds crazy.
Mitch Weiss:
Yeah, it’s changing now. It’s changing now. And besides the geopolitical fissures that exist, there’s also actual ones. He writes about, and we know about the fact that much of the world’s chip manufacturing capacity sits nearby earthquake-prone zones. So, a human-made disaster or a natural disaster, any of those things could take out huge amounts of chip capacity and really disrupt life as we know it.
Brian Kenny:
Where does most of the R & D happen? Is the US still heavily engaged in the R & D around this technology?
Mitch Weiss:
Yes. The US is still heavily engaged in the R & D, and I shouldn’t say increasingly now because of chips and things that preceded chips doing now more of the manufacturing. A lot of the R & D still happens here. There are firms, many firms in the United States that are essentially, they’re called fabless firms. They’re firms that design chips but don’t make them. And then, there are firms called foundries, the places that make chips but don’t design them. We have some foundries now, but we have lots of fabless firms. We have lots of fascinating chip design.
And we also do other things. If you think about the whole chip supply chain, a lot of the R&D is not just about the chip, but it’s also about the manufacturing of the chip. How do you design machines to make smaller and smaller and smaller and really, really, really small chips?
Brian Kenny:
Teeny tiny chips.
Mitch Weiss:
Yeah, we do a lot of the R&D, but I think the epiphany people had was during COVID economically and also with the geopolitics as it is that doing the R&D but not the manufacturing wasn’t going to be enough.
Brian Kenny:
Let’s go back to the central issue as you defined it in the case, this pre-application process, why is that so revolutionary and what are they hoping to achieve by doing it?
Mitch Weiss:
It’s revolutionary, that might be a strong word, but it’s revolutionary in the sense of, imagine most government grant processes, even if you’re not steeped in all of this, mostly what happens is there’s some notice of funding opportunity. Here, they call it a NOFO or some request for proposals, an RFP or some other bit of paperwork that the government sends out. And it’s long, and then you fill it out. And if you’re a company, you get a bunch of engineers and lawyers and consultants to help you fill it out. And then, you send it to them.
And then, they sit in some… They all joke, but they sit in some smoke-filled room even though people don’t smoke inside anymore. And then, later on they tell you who got the money or who didn’t. That was the way it worked. And in part, that almost makes some sense because it seems very structured, very rule-based, very rigorous. And it seems like in a process like that, while it’s opaque that it’s standardized and isn’t that what we want in government, is something that’s standardized.
Because then there wasn’t the space for bad things to happen, fraud, corruption, otherwise. Well, the problem with that is it is actually very, very opaque. It’s not very inviting to firms, especially new firms who might be new into the semiconductor space. It also doesn’t give a lot of visibility to the people who have to give this money out or loan this money out or grant this money out, what applications are coming.
So, part of the motivation was, well, don’t we want to have a process that actually be much more iterative, much more discussive, much more communicative? Don’t we actually want to be able to have a back-and-forth with these companies about what they’re planning, whether we would fund it? Maybe if they planned X instead, we could maybe have more confidence in it. The way the rest of us humans work, most of the time we’re engaged in business transactions, it’s like, why don’t we have it back-and-forth?
So, they did it in order to have a much more iterative process to learn much faster, to be more inviting to potential applicants. Well, that’s at least why they were considering it at the time of the case was maybe if we had a pre-application, people could put their toe in the water, their foot in the water, get halfway through the door, get some feedback from us, and we could bring a much more discussive process.
Brian Kenny:
So, do you think that a process like this, I mean, is it fair to say that this would make it more welcoming for more innovative firms, maybe smaller firms to participate where otherwise they don’t have the resources to put together in the old form anyway?
Mitch Weiss:
That was absolutely the hypothesis that the folks in the CHIPS Program Office had, whether it was Mike Schmidt who ran the office, Todd Fisher who ran the investment stuff, Morgan Dwyer, who was head on the policy, strategy side, that was the hypothesis they had. This would make it more inviting. They also believed it would ultimately make the application stronger, not just more people and more different people would apply. But that also, we would get stronger applications eventually because we could have given them some indications along the way of what would work, what would we welcome.
Brian Kenny:
And you’re putting an awful lot of pressure on the office itself to write an RFP or-
Mitch Weiss:
A NOFO in this case they call it.
Brian Kenny:
A NOFO that is so comprehensive that it answers every single question that a potential applicant might have.
Mitch Weiss:
And they always had other processes for answering questions. And you ask us the question, we tell the whole world what the questions were asked, but it was all very rigid and bureaucratic, and this was meant to be more iterative, a lot more learning, a lot more agile, a lot more flexible. So, the hypothesis was we get more applicants, we get better applications. We have more visibility into the applications we were getting as we began to judge them. And that would help us shape both our evaluations and the future NOFOs for future rounds of funding.
Brian Kenny:
Is there a lot of public, private interaction in the semiconductor space? Are there a lot of initiatives that are happening that involve both private firms and the government?
Mitch Weiss:
There was a meaningful overlap. If you think about it, of course, the government was a huge, as we talked about in the defense context, a huge user of semiconductors, has a big interest in that, that extends not just from the federal government. But if you look at state and local governments, semiconductor manufacturing in certain regions was still of interest to people. So, there was meaningful amounts of engagement. But I would say that post this era, there was much more substantial engagement between the government and the leaders of these companies, whether they were fabless firms or whether they were the CEOs of the new foundries or whether they were leaders inside the industries that need access to these chips.
There has been much more engagement now between those two sectors, I think, than there was before.
Brian Kenny:
Yeah, the case does dive into some of the risk mitigation factors that they put in place, that $39 billion is a lot of taxpayer money. What are they doing to ensure that it’s being spent in an appropriate way?
Mitch Weiss:
The way they actually set up their whole shop at CHIPs, the whole office in a way is some risk mitigation effort in terms of bringing in super talented people who had experienced both the national security industry and the semiconductor industry and from the world of finance so they could actually evaluate these things in a sophisticated way. You got the evaluation process as a risk mitigator. You’ve got talent as a risk mitigator. You got all oversight from other entities as risk mitigation.
You also had some other provisions they were debating as I write in the case that they were debating in terms of the NOFO and the overall process. So, for example, milestone payments, they don’t give all the money out at once. They make it available in milestones to the companies that have been granted it if they meet certain commitments they had in terms of capacity and build-out and all the rest. So, milestones is a key thing.
They actually had upside sharing provision in this process. So, there’s a big information asymmetry. Of course, the firm knows what they think it’s going to cost to build a foundry and also what they think they’re going to make when they sell chips. This government now is quite sophisticated on this front, but has less of that information.
And there might be the tendency by companies to way undersell how much profit they’re going to make so that they can say, “We’re desperate for government funding.” And so, they put a provision in there that says, “Look, we’re not trying to make money off this deal. We really want to get chip capacity in this country, but if it turns out you way undertold us what the profits going to be, we are going to get some of that,” just to try to really invite people to be quite candid about their business models.
And so, that was another key risk mitigation technique. But the big riddle that these bags… Well, two big riddles, Brian, is one is like, well, what is the right level of risk? Is it zero? Is it something more than zero? And the second thing is like, well, when you say risk, well, again, which risks are we talking about? Because there’s at least two giant risks here. And one is that we invest in plants we shouldn’t have that it was technologies we didn’t need, or there was oversupply, or it turns out the company couldn’t actually deliver what they said they could. That would be like a waste of taxpayer money. That’s a serious risk.
There’s another risk, which is we don’t invest in the plants that we do need. We don’t invest in the technologies that we do need. And we don’t have our phones or our cars or our medical devices or our defense apparatus. So, when you say, how are we managing risk, you’re really actually trying to think about both those risks. And that’s a really, really important line to find.
Brian Kenny:
I’m curious. You’ve spent a fair amount of time in government in your career. How do you attract that talent to a government job? I’m guessing these people could probably make a lot more money in the private sector. What draws them to something like this?
Mitch Weiss:
Mission. There are folks who would disagree who would say this chip thing is overblown and we have enough capacity, and the global markets work themselves out, et cetera, et cetera. So, I want to acknowledge that. But let’s say you do agree with the thesis of the CHIPs and Science Act, the purpose of the CHIPS Program Office, the rationale for these funds, which is United States, absolutely, absolutely, for its national security purposes, not to mention its economic ones, needs access to advanced semiconductor R&D, but in this case, manufacturing, come be a part of that. Come be a part of making that happen.
Mission is what attracts folks to this. And then, give them the discretion and the agency to make a difference. This is where a little bit of the pre-app riddle comes back, which is like you can invite people in to be part of really important mission, but if all they are are box checkers on an RFP, they’re going to be like, “Why am I here?” But if you’re really inviting them to use their brain and their experience and say, “Gosh, is this the firm? Is that the firm? Is this the right amount? Is that the right amount?”
How do we marry up our… Again, making sure this is prudent financially, but also that achieves our national security objectives. Those are tough questions. If you invite in people to a giant mission and give them tough questions to work on, they’ll be excited to come and stay.
Brian Kenny:
I would imagine also the pre-applications here, maybe in an unintended way is creating a body of knowledge within the CHIPs office about technologies, innovative approaches to solving these problems that otherwise they probably wouldn’t have access to.
Mitch Weiss:
Yeah, they’re a very sophisticated bunch, and some of them came from the industry, and they certainly have lots of ways of reaching out and getting information. So, they’re quite informed, and they’re also quite careful by the way about making sure that information that came in from one company doesn’t leak to a team that’s working on a different company.
Brian Kenny:
I hope so.
Mitch Weiss:
But the pre-apps do help them get a sense for what the interest is out in the marketplace for these government supports. In addition, they were contemplating something interesting when they wrote the case, which was rolling applications so that it wasn’t like there was one deadline. All the things came in and they were all compared against each other, but in fact, submit your stuff when it’s ready. And in this way, they were also mitigating some in a way technological risk, which is, we’ll invest some now, but we’ll keep some as new technologies present themselves, a new manufacturing capacity presents itself. That, of course, added to another riddle, which is, well, how fast do we put out this money?
Brian Kenny:
How does the US compare to other countries where it comes to these partnerships in the semiconductor space? Are we unique?
Mitch Weiss:
No, we’re not unique. I think that some of the design here on the CHIPS Program Office quite unique. And I think the fact that they’ve attracted really serious talent into this office is somewhat new for them. But many other countries and regions have passed similar bills, stood up similar efforts out of similar sets of concerns. And so, the EU has a Chips Act. Japan has money that goes into this. Certainly China has put billions of dollars into these efforts. And so, we’re not alone in all of this, which raises a whole other set of questions, which is like, well, if all the governments are putting money into this, then what’s the point of any government putting money into it?
Brian Kenny:
Yeah. Well, let’s talk about that for a second because I’m sure they’ve been into this for a couple of years now, two or three years. How’s it going? What are the critics? What are the bumps that they’ve encountered along the way?
Mitch Weiss:
The first NOFO, Chips NOFO went out in the early part of 2023, so it’s really only been about a year. Without spoiling too too much of the case, I would say that there’s this constant riddle about how fast should we get the money out. Again, this is balancing the risk. If it’s too slow, then we might lose the race for chip independence. If it’s too fast, we might give money out in ways that were imprudent. So, how do you think about the pacing? And so, you could absolutely find over last year, people who would say, “You’re not moving fast enough. Why haven’t you put the money out fast enough?” I will say that over the last couple of months, there have been some major, major announcements, many billion dollar announcements to some of the major manufacturers to do chip manufacturing in the United States, and that’s one indication that this process is rolling. In addition, what the CHIPs folks would tell you is there were also commitments that companies made ahead of the government saying they were putting the money out the door, but as the government said that money would be available, that induced chip manufacturing capacity to start, capacity start coming online. They would tell you there has already been an impact from the bill, even before the money from the bill went out the door.
Brian Kenny:
So, it’s a little bit of a cart-horse thing, right? The manufacturers aren’t going to start to rev things up until they know they’ve got some of that money.
Mitch Weiss:
Well, no, it’s like the opposite. It’s like the manufacturers, because it takes so long, are going to rev things up even before they have the money, hoping that they will get some of the money and that their revving up will invite some of that money their direction. There’s already been progress, announcements and other things in Arizona, in New York, otherwise down this road. There’s always this push-pull about how fast, how slow. But suffice to say that even before the money was going out the door, there was activity and now we’re seeing more.
Brian Kenny:
I’m going to ask you to prognosticate a little bit. I know faculty love to predict the future, but I’m wondering what would success look like for the Chips and Science Act five years from now?
Mitch Weiss:
Good news. First of all, I don’t have to prognosticate. The interesting thing is that Secretary Raimondo, when they announced the bill, and then they announced the crafting of the CHIPS Program Office, which I write about in the case, she says, “We’re going to be judged on two things years from now.” She says, “We’re going to be judged on basically two imperatives.” She says, “One, is whether this program, these monies enable us to build a reliable and reliant, reliable and reliant semiconductor industry that protects America’s technological leadership for the coming decades.”
So, there she’s talking about, will we have the advanced manufacturing capacity and the advanced R&D so that we’re designing still and producing the most advanced chips in the world so we could have our national security preserved and our technological innovation frontier advanced? That’s judgment number one. Did we achieve that? And the second thing she says is, we’re going to be judged on whether we were good stewards of taxpayer money. That’s judgment number two.
Hanging over their heads is this whole Solyndra escapade, which was one of the companies that was funded during the Obama administration when they were doing energy loans and grants. Everybody remembers this one firm, which got $500-plus million and then went bankrupt. And so, oh my God, that was a terrible episode of government funding. People forget that the government may have profited some 5 to 6 billion on that portfolio. People forget things like Tesla got loan guarantees out of that effort, but they all remembered the one thing that went poorly.
I guess if I was thinking about how this will be judged, it’s her two criteria, which are, do we have technological independence and innovation. On the one hand, have we been basically prudent with the taxpayer money on the other? But I would maybe add a third, which is, have we done it in such a way that we’ve built confidence and awareness in the American public that we can invest money like this, that even though it won’t all go perfectly, that on balance, it’s an important way to support the strategic imperatives of the United States.
And it’ll be a success if we have the tech piece, if we have the fiscal piece. The American public will have to come and understand that when you make investments like this, you’re not going to have a 100 percent success rate. That would be, in a way, it would be minimizing the taxpayer risk, but maximizing the national security risk. And that seems like an odd balance.
Brian Kenny:
And just to be clear, the goal here is not necessarily to ensure that all the chips that we’re using in our devices are produced in the United States by American firms. That would be unattainable, I would think.
Mitch Weiss:
No, that’s not the goal whatsoever. It’s to make sure that we have access to the chips that we need. It’s to make sure that there’s some diversity in the supply chain. By the way, this group is working with partners around the world to see what they’re doing in their countries and to see how we can have a truly global supply chain. The goal is not to make it all here. The goal is just to make sure that we make enough of it here, that we have resilience and that we have plenty of innovation.
And again, I write this in the case, I want to acknowledge it here. There are plenty of people who think those are important goals, but that doesn’t mean the government should be spending public money on it. In the case, I talk about the people who think this is corporate welfare and who think these companies that ultimately have these monies don’t need it and et cetera, et cetera. And so, one of the things we have a discussion about in the class is, as I mentioned the cold call, it’s like, “Is this a good idea?”
Brian Kenny:
How does this fit with your definition of public entrepreneurship? Is this in the spectrum?
Mitch Weiss:
Absolutely. I’m always interested in basically possibility government doing things that haven’t been done before. And so, by nature, they’re probably not going to work, but they possibly might, in a way of putting out money that hasn’t precisely been done before. I’m fascinated in them being willing to try a new approach. The other thing I’m really fascinated in, and this is where a lot of my research is in these days, and ultimately I think a second book, is what are the systems in governments that enable or disenable innovation, the underlying systems?
My earlier work was about the tactics that you can use, but the fundamental systems and those systems are procurement, budget, to your question, talent, but also the accountability systems in government. What do we hold people accountable for? When you think about public entrepreneurship, you really want to make sure that, of course, we’re holding people accountable for the errors they make, errors of commission essentially.
But if you want real invention, you have to hold people accountable for basically not trying things also. We need people to basically be inventive and creative. And I’ve been playing around with a lot of ideas about how we would get that in the government. The thought experiment I give at the end of this case, it’s not in the case, but when we teach it is all over the Department of Commerce, which is where the CHIPS Program Office sits. There are posters, signs.
You can see them online if you Google them from the Inspector General of the Department of Commerce, which basically says, “Look, report waste from fraud and abuse.” And you totally, we desperately need people reporting waste from fraud and abuse… there’s this thought experiment I run, which is what if there was a second sign and then there was a second group of people, let’s call them “possibility generals” for right now, but that’s a little too cute.
But the second sign says, “report waste from timidity and weakness,” but you can also waste by not doing. This fits into public entrepreneurship because it’s all about this balance between doing, not doing which errors. It was square and all this stuff I study, and getting to know these folks and watching some of their work and still watching it now has been absolutely fascinating to me.
Brian Kenny:
Mitch, this has been a great conversation. It always is when we get together, so thanks for being here. One last question. If we could close out just by telling us what you’d like listeners to remember about the CHIPS case.
Mitch Weiss:
I think if listeners are interested in chips, especially in government efforts to engage in industrial policy, which is a big debate these days for the US government, should other governments be getting back into this business, I’d like them to really think about risk as being not just the risk of taxpayer money getting spent on a plant that it shouldn’t have, but the risk of taxpayer money not getting spent on a plant that it should have. You really got to get your mind around there’s both those risks.
And for our listeners who are maybe interested in chips, but also think more broadly, I think that raises this other riddle that all leaders can think about all the time in other organizations, which is in every situation you have the errors of commission people can make, doing things they shouldn’t have, and the errors of omission they can make, not doing things they should have. And in any situation you’re presented with, you always have both those risks.
You have to think about as a leader, “What’s your appetite for either kind of those risks?” If you had to tradeoff between the two, where would you tradeoff between the two and what efforts can you make to minimize both? And those are the efforts we see the CHIPS Program Office wrestling with in this case.
Brian Kenny:
Mitch, thanks for being on Cold Call.
Mitch Weiss:
Thank you.
Brian Kenny:
If you enjoy Cold Call, you might like our other podcasts, After Hours, Climate Rising, Deep Purpose, IdeaCast, Managing the Future of Work, Skydeck, Think Big, Buy Small, and Women at Work, find them on Apple, Spotify, or wherever you listen. And if you could take a minute to rate and review us, we’d be grateful. If you have any suggestions or just want to say hello, we want to hear from you, email us at coldcall@hbs.edu. Thanks again for joining us, I’m your host Brian Kenny, and you’ve been listening to Cold Call, an official podcast of Harvard Business School and part of the HBR Podcast Network.
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