How to get risk into research

There is a paradox at the heart of the innovation strategy. How can the government, by nature a risk-averse institution, encourage more risk-taking?

Vital to innovation is research. And vital to ground-breaking research is that researchers feel and are free to take risks, big risks.

This was one of the most salient points to emerge at a day-long forum on Thursday [14 March] on the potential for and of interaction between the arts and science organised by the Ministry of Research, Science and Technology.

“We have to encourage our funders to allow us to f… up,” one participant said.

Science Minister Pete Hodgson is on record as keen to encourage more risk-taking in his Crown research institutes (CRIs). He has set up centres of excellence to encourage deeper research.

Moreover Finance Minister Michael Cullen has loosened tax treatment to encourage more private sector research.

But the government still owns and funds the vast bulk of the research activity.

And government politicians are risk-averse. They fear upsetting the electorate — which means they prefer to avoid activities that might become controversial when opposition MPs or the media latch on to them.

Because the politicians are risk-averse, those who work for them must be risk-averse, too. An important public service rule is that public servants must not be the source of embarrassment to ministers.

Even arm’s-length arrangements don’t shield ministers, as health ministers through the 1990s found when actions by supposedly independently-run, commercially oriented hospitals landed back on ministers’ plates in Parliament.

This “buck-stops-here” syndrome holds back government ministers — and their public servants.

Attempts to replicate in the public service the “creative destruction” that gives capitalism its dynamism founder on this reef. A forum of state sector chief executives who explored this topic some years ago could come up with no workable formula.

A public service project doesn’t just fail in its own little world, as a small business does, nor does it disappear in an otherwise good bottom-line result as a failed venture by a larger company does. A public service project’s failure is accountable back through the chief executive and the minister to the taxpayer for “waste” of public money. Voters resent paying for something that doesn’t work.

Hence, projects of indifferent value often continue for fear that dropping them might attract opprobrium for having been started in the first place. Evaluation has been skimped on — though last year’s high-powered “review of the centre” (Business Herald 31 December) did commit the government to more evaluation henceforth.

One way round political and bureaucratic diffidence is for the government to fund private initiatives which show promise or already have a track record — for example, those of so-called “social entrepreneurs”.

Social Services Minister Steve Maharey has been edging down this route, though he has yet to convince most of his colleagues. And he has yet to be put to the “creative destruction” test by the failure of one of his social entrepreneurs.

Science has one advantage over most areas of public spending. The vast bulk of it goes on outside the purview and comprehension of politicians and the media.

So CRIs have never become controversial in the way hospitals did, even though they are from a similar organisational mould. Scientists who opposed the early 1990s science reforms went largely unheard. Controversy tends to be over non-science research projects, such as in the sociological and medical fields — though genetic modification has come into the frame recently.

So there is scope for risk-taking in CRIs and centres of excellence. And over the past few years some leeway has been built into funding and organisational decisions. In the wake of Thursday’s forum we may even see an artist or two loosely attached to CRI labs against the possibility that will stimulate out-of-the-square thinking.

But will that encourage enough of the sort of often inconclusive and only occasionally directly productive long-run research to produce the breakthroughs the government says it wants?

Maybe. But there is a limit to how far taxpayer-funded institutions can stray from a focus on usable or saleable results without risking ministerial embarrassment. That is not an ideal formula for great leaps forward.