2010 Annual Letter from Bill Gates: Innovation
The Difference Between a Bleak Future and a Bright One
In India, just like everywhere else we work, the needs of the poor are greater than the resources available to help them solve their problems. It is important to get more money, but that alone will not solve the big problems. This is why Melinda and I are such big believers in innovations that allow you to do a lot more for the same cost.
During the last two centuries, there have been a huge number of innovations that have fundamentally changed the human condition—more than doubling our life span and giving us cheap energy and more food. Society underinvests in innovation in general but particularly in two important areas. One area is innovations that would mostly benefit poor people—there is too little investment here because the poor can’t generate a market demand. The second area is sectors like education or preventative health services, where there isn’t an agreed-upon measure of excellence to tell the market how to pick the best ideas.
If we project what the world will be like 10 years from now without innovation in health, education, energy, or food, the picture is quite bleak. Health costs for the rich will escalate, forcing tough trade-offs and keeping the poor stuck in the bad situation they are in today. In the United States, rising education costs will mean that fewer people will be able to get a great college education and the public K–12 system will still be doing a poor job for the underprivileged. We will have to increase the price of energy to reduce consumption, and the poor will suffer from both this higher cost and the effects of climate change. In food we will have big shortages because we won’t have enough land to feed the world’s growing population and support its richer diet.
However, I am optimistic that innovations will allow us to avoid these bleak outcomes. In the United States, advances in online learning and new ways to help teachers improve will make a great education more accessible than ever. With vaccines, drugs, and other improvements, health in poor countries will continue to get better, and people will choose to have smaller families. With better seeds, training, and access to markets, farmers in poor countries will be able to grow more food. The world will find clean ways to produce electricity at a lower cost, and more people will lift themselves out of poverty.
Although innovation is unpredictable, there is a lot that governments, private companies, and foundations can do to accelerate it. Rich governments need to spend more on research and development, for instance, and we need better measurement systems in health and education to determine what works.
Melinda and I see our foundation’s key role as investing in innovations that would not otherwise be funded. This draws not only on our backgrounds in technology but also on the foundation’s size and ability to take a long-term view and take large risks on new approaches. Warren Buffett put it well in 2006 when he told us, “Don’t just go for safe projects. You can bat a thousand in this game if you want to by doing nothing important. Or you’ll bat something less than that if you take on the really tough problems.” We are backing innovations in education, food, and health as well as some related areas like savings for the poor. Later in the letter I talk about why we don’t currently see a role for the foundation in energy.
We have a framework for deciding which innovations we get behind. A key criterion for us is that once the innovation is proven, the cost of maintaining it needs to be much lower than the benefit, so that individuals or governments will want to keep it going when we are no longer involved. Many things we could fund don’t meet this requirement, so we stay away from them. Another consideration for us is the ability to find partners with excellent teams of people who will benefit from significant resources over a period of 5 to 15 years.
Our framework involves funding a range of ideas with different levels of risk that they could fail. The ones with low risk are where the innovation has been proven at a small scale and the challenge is to scale up the delivery. High-risk innovations require the invention of new tools. Some are at the frontiers of science, such as finding a new drug and running a large trial to see how well it works. Other high-risk efforts involve changing social practices, such as persuading men at risk of getting HIV to get circumcised.
It is critical that we understand in advance what might prevent an innovation from succeeding at scale. For work in developing countries, the lack of skilled workers or electricity might be a key constraint. For work with teachers, we need an approach to measuring their effectiveness that they will welcome as a chance to improve rather than reject because they think it’s more overhead or fear that it might be capricious. Even with the best efforts to make sure we understand the challenges, we need intermediate milestones so we can look at what we have learned about the technology or the delivery constraints and either adjust the design or decide that the project should end. We are focused on strong measurement systems and sharing our results where we have successes but also where we have failures. Innovation proceeds more rapidly when different parties can build on each other’s work and avoid going down the same dead end that others have gone down.
To provide some examples, in the chart below, I show nine innovations we are investing in, broken into sections for each of the foundation’s three divisions. Overall we have about 30 innovations we are backing. Although the list below includes only one new vaccine and one new seed, we are funding vaccines for several diseases (malaria, AIDS, tuberculosis, etc.) and new seeds for many crops (corn, rice, wheat, sorghum, etc.). For each innovation I show the time frame, beneficiaries, and constraints. A few things we do, like disaster relief and scholarships, do not fit this model, but over 90 percent of our work does.
During the last two centuries, there have been a huge number of innovations that have fundamentally changed the human condition—more than doubling our life span and giving us cheap energy and more food. Society underinvests in innovation in general but particularly in two important areas. One area is innovations that would mostly benefit poor people—there is too little investment here because the poor can’t generate a market demand. The second area is sectors like education or preventative health services, where there isn’t an agreed-upon measure of excellence to tell the market how to pick the best ideas.
If we project what the world will be like 10 years from now without innovation in health, education, energy, or food, the picture is quite bleak. Health costs for the rich will escalate, forcing tough trade-offs and keeping the poor stuck in the bad situation they are in today. In the United States, rising education costs will mean that fewer people will be able to get a great college education and the public K–12 system will still be doing a poor job for the underprivileged. We will have to increase the price of energy to reduce consumption, and the poor will suffer from both this higher cost and the effects of climate change. In food we will have big shortages because we won’t have enough land to feed the world’s growing population and support its richer diet.
However, I am optimistic that innovations will allow us to avoid these bleak outcomes. In the United States, advances in online learning and new ways to help teachers improve will make a great education more accessible than ever. With vaccines, drugs, and other improvements, health in poor countries will continue to get better, and people will choose to have smaller families. With better seeds, training, and access to markets, farmers in poor countries will be able to grow more food. The world will find clean ways to produce electricity at a lower cost, and more people will lift themselves out of poverty.
Although innovation is unpredictable, there is a lot that governments, private companies, and foundations can do to accelerate it. Rich governments need to spend more on research and development, for instance, and we need better measurement systems in health and education to determine what works.
Melinda and I see our foundation’s key role as investing in innovations that would not otherwise be funded. This draws not only on our backgrounds in technology but also on the foundation’s size and ability to take a long-term view and take large risks on new approaches. Warren Buffett put it well in 2006 when he told us, “Don’t just go for safe projects. You can bat a thousand in this game if you want to by doing nothing important. Or you’ll bat something less than that if you take on the really tough problems.” We are backing innovations in education, food, and health as well as some related areas like savings for the poor. Later in the letter I talk about why we don’t currently see a role for the foundation in energy.
We have a framework for deciding which innovations we get behind. A key criterion for us is that once the innovation is proven, the cost of maintaining it needs to be much lower than the benefit, so that individuals or governments will want to keep it going when we are no longer involved. Many things we could fund don’t meet this requirement, so we stay away from them. Another consideration for us is the ability to find partners with excellent teams of people who will benefit from significant resources over a period of 5 to 15 years.
Our framework involves funding a range of ideas with different levels of risk that they could fail. The ones with low risk are where the innovation has been proven at a small scale and the challenge is to scale up the delivery. High-risk innovations require the invention of new tools. Some are at the frontiers of science, such as finding a new drug and running a large trial to see how well it works. Other high-risk efforts involve changing social practices, such as persuading men at risk of getting HIV to get circumcised.
It is critical that we understand in advance what might prevent an innovation from succeeding at scale. For work in developing countries, the lack of skilled workers or electricity might be a key constraint. For work with teachers, we need an approach to measuring their effectiveness that they will welcome as a chance to improve rather than reject because they think it’s more overhead or fear that it might be capricious. Even with the best efforts to make sure we understand the challenges, we need intermediate milestones so we can look at what we have learned about the technology or the delivery constraints and either adjust the design or decide that the project should end. We are focused on strong measurement systems and sharing our results where we have successes but also where we have failures. Innovation proceeds more rapidly when different parties can build on each other’s work and avoid going down the same dead end that others have gone down.
To provide some examples, in the chart below, I show nine innovations we are investing in, broken into sections for each of the foundation’s three divisions. Overall we have about 30 innovations we are backing. Although the list below includes only one new vaccine and one new seed, we are funding vaccines for several diseases (malaria, AIDS, tuberculosis, etc.) and new seeds for many crops (corn, rice, wheat, sorghum, etc.). For each innovation I show the time frame, beneficiaries, and constraints. A few things we do, like disaster relief and scholarships, do not fit this model, but over 90 percent of our work does.
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