MIT Faculty Newsletter  
Vol. XXIII No. 4
March / April 2011
Protecting Education in America
The Contributions of Institutions Such As
MIT to a Knowledge-Based Economy
Reinventing and Sustaining the
Faculty of the Future
Departmental Discussions of Diversity
and Inclusion
Practical Considerations for the Involvement of Graduate Students in MIT’s International Engagements
The Roadmap to the Future of MIT’s
Student Information System
Free Market Apocalypse: Safeguarding the World from Large Disasters
About DSpace@MIT
Disappointed in NRC Rankings Prominence
MIT 3rd in World University Rankings
U.S. News & World Report:
Top 10 Graduate Engineering Schools
U.S. News & World Report:
Top 10 Graduate Business Schools
Printable Version

The Contributions of Institutions Such As MIT
to a Knowledge-Based Economy

L. Rafael Reif

An article in the January/February 2011 Faculty Newsletter introduced MIT’s approach to international engagement. The article pointed out, among other things, that it is important that all collaborating institutions benefit significantly from the engagement. It also recognized that much of the international interest in institutions such as MIT is driven by the desire to understand MIT’s culture of innovation and of successfully transferring innovative research results to industry, since the latter benefits the national economy and, by extension, society at large.

The ongoing domestic debate regarding our national budget, in particular the debate about what constitutes a cost that potentially could be reduced, in contrast to an investment in the future that should be protected, provides us with an opportunity to remind ourselves (and, hopefully, others in the U.S.) of the ways in which institutions such as MIT contribute to the well-being of our nation. In fact, MIT’s mission statement refers to the advancement of knowledge and the education of students in ways that “will best serve the nation” as well as the world, and it is important to reflect periodically on how well we are living up to that part of our mission. International interest in MIT innovation can remind us of how our own nation is served by the advancement of knowledge and the education of students taking place at institutions such as MIT.

There are, of course, many ways in which an educational institution such as MIT contributes to the development of individuals and society. The purpose of this article is to focus on its value from the point of view of educating students – the human capital – who contribute to society through knowledge creation and applications and, more specifically still, on its value to a knowledge-based, domestic economy.

Much of the content of this article aims to describe the MIT model for achieving these goals, and therefore will likely be familiar to our faculty, who live our mission statement in their daily activities, and hence are at the forefront of knowledge creation, dissemination, and application.

I. Premise

Nations that lead in innovation typically share at least the following three assets:

  • Human capital,
  • Educational and research institutions where knowledge is taught, created, preserved, and used to solve important problems, and
  • A society that develops its human capital and supports its educational and research institutions, that incentivizes the creation of knowledge and competitive products that benefit society, that embraces and practices meritocracy, that encourages the free flow of ideas and talents, and that protects intellectual property.

It is important to acknowledge that these assets are necessary, but not sufficient, for success in the knowledge economy. For example, a reliable infrastructure, the rule of law, and access to financial capital are absolutely essential as well. This article will focus only on the three noted above.

II. Human capital

In order to play a leading role in innovation, a nation needs a significant pool of well-educated and highly creative individuals within its population. This could be partially achieved by attracting talented individuals willing to cross national boundaries for better opportunities. However, in order to truly succeed and remain successful in the ever-changing knowledge economy, a nation needs to invest continuously in its human capital. It can do so by educating and preparing its youth to compete in the knowledge-based economy. It can do so by refreshing what they are taught, and innovating how they are taught. In the process, students develop the self-confidence that comes with learning, and they themselves learn to innovate, to create, to compete, to be entrepreneurial, to take risks, to persevere, to strive for excellence, and to be unafraid of failure. In this way, a nation’s human capital is continuously renewed.

III. Educational and research institutions

The importance of educational and research institutions where knowledge is taught, created, preserved, and used to solve important problems may seem obvious. But to succeed in the innovation economy, a nation needs institutions that deliberately prepare its young people to compete in the global marketplace of ideas, knowledge, and products – and to compete not only against local talent but against talent from all over the world. If a nation wants to succeed in the knowledge economy, its educational institutions need to provide their students with the skills and self-confidence to think in creative and innovative ways.

MIT is an example of an academic institution where knowledge is taught, created, preserved, and used to solve important problems. It does so by means of the following five interrelated principles and approaches that have evolved over the years and that are intrinsic to the fabric of the Institute.

First: Interdepartmental/interdisciplinary research units. MIT has approximately 30 academic departments, which hire virtually all of MIT faculty. These departments also organize and carry out undergraduate and graduate teaching programs, and award degrees in their disciplines. A defining aspect of MIT’s approach is that we also have approximately 50 interdepartmental research units (e.g., laboratories, centers, institutes, initiatives). These units cut across departmental boundaries and focus on broad research themes (e.g., microsystems), or on a specific research mission (e.g., energy, cancer). Working across disciplinary boundaries, these interdepartmental research units make it possible for interested MIT faculty, students, and staff to work collaboratively on the solutions of difficult and important challenges by applying a variety of tools and perspectives.

Second: MIT integrates education and research. Research is in the DNA of MIT, and almost everyone at the Institute is involved in it. MIT believes that teaching and research must go hand in hand, and that they make each other stronger.

As with other private U.S. universities, at MIT the funding for the teaching and learning component of our academic enterprise comes mainly from tuition revenues, support from investments, and gifts. These funding sources represent a significant fraction of MIT’s annual revenues.

On the other hand, funding for research is typically obtained by, and awarded to, an individual professor or groups of professors. This funding comes primarily from research sponsors such as the U.S. Federal Government, industry, private foundations, and foreign governments. Altogether, MIT received ~$600M in research funding last year (Fiscal Year 2010), an average of ~$600,000/year per faculty member. The quality of the education that MIT provides depends heavily on this research support. Without it, our ability to integrate research so closely with teaching and learning would not be possible.

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Third: MIT pursues – and values – the most abstract, curiosity-driven, fundamental research, and the most applied, market-oriented innovations. At MIT, our faculty members pursue fundamental, curiosity-driven research and, at the same time, use knowledge to solve important problems. In fact, long-term fundamental research provides the foundations for knowledge advancement that in turn often finds application to real-world problems. MIT benefits immensely from the strengths and accomplishments in research and education of faculty, students, and staff from our five Schools. While the Schools and departments provide rigorous depth of knowledge in their fundamental and applied disciplines, the interdepartmental research units serve to interconnect the different disciplines. This interlocked education and research infrastructure sustains an academic institution that is simultaneously deep and broad, fundamental and applied.

Fourth: MIT interacts with industry. Of MIT’s roughly $600M in annual research volume, about 70% comes from the U.S. Federal Government, about 15% comes from industry, and the remaining 15% comes from foundations and foreign governments. Research funded by the U.S. Federal Government typically supports the creation of knowledge and the solution of problems regardless of whether the research results might benefit an existing industry sector, or create a new market or industry sector. This fundamental and enabling support of our research activities greatly benefits society through the creation of knowledge and the education of students. In fact, long-term government funding of research is a great example of a nation’s investment in its own future.

Industrial funding plays a different, yet extremely important, role. By and large, industry tends to sponsor research that creates new knowledge or solves important problems in the industry sector of the sponsor. The value to our research enterprise of interacting with industry extends far beyond the funding itself.

Working with industry exposes us to real-world problems and allows us to work on realistic and practical, but still long-term, challenges. It has the added benefit of accelerating the transfer of knowledge gained at MIT into the marketplace.

Another way in which MIT interacts with industry is via our Industrial Liaison Program (ILP). The ILP works closely with nearly 200 member companies, matching their needs with the expertise of our faculty. A significant fraction of the ILP matchmaking efforts leads to either industrial research funding for faculty on campus, enrollment in executive or other educational offerings, and/or other forms of mutually beneficial engagements. Yet another channel to industry is through our Technology Licensing Office (TLO), which manages the process of transferring technology from MIT to the commercial sector. This office typically negotiates ~90 technology licenses every year, and helps create about 15-20 start-up companies annually. Research funding, ILP, and TLO are just a few examples of MIT’s interactions with the industrial sector.

Technology transfer also occurs naturally when students graduate and join the marketplace. In fact, the largest form of technology and knowledge transfer has always been and will always be the education of students who carry new ideas with them into industry. For example, close to 26,000 currently active companies have been founded by MIT alumni, which together generate annual revenues of $2 trillion and employ about 3.3 million people (from Entrepreneurial Impact: The Role of MIT, E.B. Roberts and C. Eesley, Kauffman Foundation, February 2009). The continuous flow of international scholarly publications is also a major contributor to knowledge and technology transfer.

Fifth: MIT is an institution driven by a mission of service. MIT’s history is rooted in a tradition of research efforts that result in practical benefits for society. MIT researchers address challenges with an underlying motivation to serve society by reaching solutions that improve our long-term quality of life.

Service includes, among many examples, additions to the pool of practical knowledge. For example, MIT is typically awarded over 160 patents annually, each one representing an innovation produced by MIT faculty, staff, and/or students motivated to create the knowledge that will impact society. Patented technology licensed for development sometimes achieves financial success, contributing to general economic growth and job creation.

In summary, educational and research institutions educate and develop our human capital, create new knowledge and apply that knowledge to solve important societal problems. At their best, these vital institutions develop the innovators and the innovations that fuel a knowledge-based economy. Investing in them is investing in our future.

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IV. A society that develops its human capital and supports its educational and research institutions, that incentivizes the creation of knowledge and competitive products that benefit society, that embraces and practices meritocracy, that encourages the free flow of ideas and talents, and that protects intellectual property

How does an innovative society support and develop its human capital? First, by offering rigorous and accessible pre-college education. Second, by offering rigorous and accessible college education. Third, by offering a vibrant domestic technology job market that absorbs the flow of college graduates and that keeps them engaged and productive. And fourth, by embracing meritocracy, so that fair competition based on merit is encouraged, practiced, and respected. In such a society, an institution such as MIT is only one piece of a large, complex system of education and research that challenges students to do their best, to seek to be challenged, and to compete with other talented students. In a competitive society, many of the brightest minds end up pursuing college and advanced degrees at places such as MIT, where they are exposed to a rigorous and demanding education that actively encourages them to innovate, to take risks, and to be unafraid of failure.

Like other U.S. universities, MIT practices meritocracy. Meritocracy, in its simplest definition, means competition based on merit – that the best ideas prevail, no matter to whom they belong, and that the most talented and capable people succeed, regardless of their background.

For example, for undergraduates, MIT practices need-blind admissions and need-based financial aid, which means that students are admitted to MIT based on merit, regardless of their ability to pay, and are offered financial aid packages according to individual need that allows them to attend MIT. Meritocracy also means that we want the best of the best at MIT, regardless of where they come from. Approximately 40 percent of MIT students pursuing graduate degrees were born outside the United States. Forty percent of our faculty members also were born outside the United States. In other words, even when there is significant and strong native human capital, it is vital to rely on broad competition on the merits, to yield the best talent. To practice meritocracy successfully, a society must accept and embrace merit and excellence as fundamental values, and as the primary criteria for individual advancement.

How does an innovative society support higher education and research that creates knowledge and solves important problems? Four forms of support are vital: First, a society must invest in its future through long-term, reliable, research funding. As mentioned earlier, MIT receives 70% of its research funding from the U.S. Federal Government via a competitive grant process. That continuous flow of funds over several decades has made institutions such as MIT powerful engines of innovation and economic growth (see, for example, Entrepreneurial Impact: The Role of MIT, E.B. Roberts and C. Eesley). Second, funding must be earned through competitive mechanisms, such as peer reviews, that let ideas compete for support, which is then given to the best ideas. Third, society must take a very long-term perspective, and support also fundamental, curiosity-driven, non-applied research, with the confidence that it will lead to unforeseeable technological innovations over the very long term. And fourth, a society needs a set of laws and policies that protect innovative ideas and encourage and reward the transition of ideas into products. In such a society, people in institutions such as MIT have the ability to think imaginatively, the confidence to think long term, the time to think deeply, and the encouragement to think practically.

What does “free flow of ideas and talents” mean? This means deliberately removing barriers that can exist within a given institution, between different institutions, between sectors like academia and industry, and even between nations. MIT collaborates regularly with industry, hospitals, government, and other universities, in the U.S. and abroad. Within MIT, talented people find or make their own connections and, if those are not within their academic discipline, they are able to connect through interdepartmental research units defined by common interests.

How does society protect intellectual property? It is not enough to grant patents and copyrights for inventions. An innovative society must have a reliable legal system so that patents and other intellectual property can be confidently transferred by contract from one party to another, and so that infringement can be prevented or compensated for.

V. Summary

As the United States faces increasing global competition for talent, ideas, and commerce, it is important to recognize some of the values that have contributed to make the United States a strong economic power:

1. Meritocracy. In people, ideas, inventions, and institutions – all competing on their merits: are they original, do they hold promise, do they change things for the better, and do they benefit society?

2. Openness and collaboration. Among and within institutions, disciplines, and sectors, so that people and ideas can flow to where they serve society best.

3. Long-term commitment. In funding, law, and policy; to talent, education, and research; so that innovators are encouraged to take risks, are rewarded if successful, and are not stigmatized if they fail.

These values, when embedded in a society rich in human capital, and embraced by institutions committed to excellence and to the creation, utilization, and dissemination of knowledge, fuel innovation, entrepreneurship, and progress. The United States and institutions such as MIT within the United States are great examples of what can be achieved by staying true to these values.

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