Good afternoon everyone and welcome to this exciting discussion about investors of first resort government think and I think that's a question that will be asking off the panel does that exist are we in a world of government think what does that look like what's good about it what's bad about it and how that should connect with the private sector. I'm absolutely thrilled to announce an amazing panel. We have with us President Terman of Singapore a country that's home to some of the textbook cases of innovative government investment. We also have with us Minister Faisal Ibrahim of the Kingdom of Saudi Arabia which is currently undergoing a lot of profound advancements with the backing of state investment. We have Kai Fu Lee founder of innovation ventures and the AI startup zero one AI which reached unicorn status in only eight months. We also have with us Professor Mariana Mazzucato of the University College of London known for her work on how to structure impact impactful public private arrangements to ensure government investment is effective and author of the entrepreneurial state. And finally we have Scott Sandel who is the CEO of new enterprise associates a venture capital firm at the leading edge of investment into emerging technologies and their applications. Welcome to all of you and welcome to our audience here in the room as well as those that are watching online. I'd like to kick off with just a few data points. The forum surveys every year business leaders from around the world. So last year's survey reached 11000 business leaders globally. And we asked a few questions around their views around government investment and government capabilities. And the first of those questions was around the capability of the public sector. And you can see some of that data up there and we won't get into detail and hopefully our online audience can see a lot more of that. But overall advanced economies show higher dynamism and capability in the public sector. Particularly in terms of the attractiveness of the public sector as an employer but even in advanced economies they perform poorly when it comes to the incentives for public officers towards risk taking and learning by doing when it comes to investing. The second set of data is when we asked about what forms of support are needed to foster innovation and transformation within industries. There's a huge amount of divergence from around the world and lots of detail that we could get into. But mostly to say that there's extremely mixed views about what the role of government should be and how much they should be co investing and partnering with the private sector versus how much they should be leading some of these investments themselves. So that's one of the questions that we're going to try to tackle. But first just a level set. Are we in an era of bigger and bolder government. And in your view how is active government investment changing the economic landscape. And President Harman if I could go to you first. I think we are in the era of bolder government. And it comes about not so much because of a change in philosophy as much as a change in the nature of the problem we face. The largest problem that we face around the world developed developing small large countries lies in the global commons. The accelerated deterioration of the global commons. It's not a global problem separate from what we face locally. It's a problem everywhere. It is a commons problem. And the scale with which we need to invest to address it and the speed with which we need to invest is one that requires all pools of capital public private even philanthropic all pools of capital. There's no conceivable future of solving this problem by relying on only the public sector because it's far too expensive for the public sector alone. It can't rely only on the private sector because markets won't respond with the speed and scale required. So it requires all pools of capital. And one way of thinking about it is that if we don't address this with the speed and scale necessary. There's going to be a very sharp trade off between growth and development on the one hand and solving the climate challenge the water crisis and the biodiversity challenge on the other. In other words it will be a trade off. You have to choose between one of the other and there's a very real risk particularly in the developing world of a lost decade of growth. Being the price you pay in order to address the challenges of the global commons or alternatively you don't proceed with mitigation. Just say that this is a problem of the global north and you carry on growing and you don't need that trade off and we can't afford that trade off between a lost decade of growth versus a lost decade of climate mitigation. We can avoid both but it requires a higher level of investment for a longer period of time and delivered with some haste. And that requires the public sector to be part of the act critically because the markets will not respond with the speed and scale necessary. I wouldn't call it investor or first resort as such. I would call it the way in which the public sector can intelligently join forces with a private sector. Drawing philanthropic capital where it's able to absorb real risk and address this challenge jointly. Thank you. Minister Alibrahim your views on the same question. Are we really seeing a trend towards bigger government. Absolutely. And I think the main reason is twofold. One I think some countries and economies are realizing that they need to do more to unlock their potential. And two as a response to the multiple crises we've seen recently I think these crises happened at a time where the maturity in terms of globalization interconnectedness integration is at its highest which meant it's more complex and it touches everyone. And I believe that pushed some governments to say you know we have assets we have capabilities. Let's put them to good use. And let's you know work together with the private sector to mobilize these assets towards our national objectives. People used to look at let's say the asset manager of government to Arthur and sovereign wealth funds as a patient source of patient capital thinking long term. But today I think we're seeing that sovereign wealth funds are becoming a source of impatient capital really you know finding paths to address challenges through upgrading or creating sectors and providing a long term view where you know even President Tharman talked about this earlier in Davos where short term is becoming very ubiquitous even in the markets. But today there's this momentum to think long term to solve our let's say climate action challenges our innovation challenges our technology disruption opportunities which is an opportunity for both public sector and private sector to work together. But that definitely means we should be OK with the private sector profiting and using that profit to good use and we should be OK with governments becoming a stronger partner with the private sector. Mr. Lee your views on the potential of that partnership. Right. Having worked in China since 1998 we saw a lot of this inaction. I think China is known as a very bold investor. But maybe not as well known is that it actually makes bets. They're not always right. And when they're wrong as long as it eventually happens the investment that you make in a key important area creates the brain trust. And I'm talking about the new energy sector around 2005 China made a major national initiative to invest across new energy. So new types of batteries solar panels and so on. And as you know now this has become the most important. But from 2005 to today is 18 years much too long for a company to be founded and go public. And many of the companies funded actually did not succeed. But that created a brain trust so that when the timing became right they came back and build some of the best solar panel companies. China has now 80 percent of the world's solar panel market share as well as many of the largest including the largest battery company C.A.T.L. And they're actually all at Davos now. But I think the key point I wanted to make was having the boldness that you know one day new energy would be important. You don't really know if it's going to be five or 10 years. But you make the bet even if you don't get the returns from the investment you build the brain trust. But I think that is a very challenging proposition for some governments that turn over quite a bit waiting 10 15 years may end up getting some criticism and cause cost challenges. So I'm not saying one approach is right or wrong. But I think the combination of betting on the right technological trends and having a long term view and having the patience to wait it out. I think that's an interesting thing that the government can do and can lead to big success in particular because the private sector cannot do that. I'm a private sector investor. And if I invested that way the fund will be out of business very quickly. But I think that so that's an interesting view to look at sovereign funds that they do need to look at returns obviously. But how do they take that long term view and potentially look at some investments that are less successful near term. But in eventually I think it leads to unbelievable returns. Thank you. Mariana in many parts of the world there is skepticism about the ability of governments to be that investor whether a short or long term and a sense of the risk if governments crowd out the private sector. Your view on that. Well I think that the title of this panel is super interesting because it goes against the narrative and the current narrative which is that government at best can correct market failures at best can be a lender of last resort not an investor first resort at best can facilitate the private sector enable the private sector derisk the private sector. You kind of wonder why anyone would bother even wanting to be a civil servant. So you know they do it notwithstanding the propaganda and the narrative that you're kind of in some ways an impediment. And so the reason I wrote the entrepreneurial state is that and that was 10 years ago we would have never had any of the smart technology in your smartphones if that's what government did. So the Internet GPS touch screen series. Not only did it come out of public investment but it was purpose oriented organizations of the DARPA type. But globally Yosma in Israel which is a public venture capital fund. You were just talking about venture capital. You know why do we admit that just in the venture capital industry for every success there's many failures but as soon as a civil servant makes a mistake they're in the front page of the UK the Daily Mail. So this idea that actually you can be an investor first resort and we have had investors of first resort. Again we wouldn't have smartphones without that. The real question is what can we learn from that experience. What does it mean to have problem oriented organizations. What does it mean to have the NASA kind of moonshot which was a really clear goal. It was to get to the moon and back in a short amount of time. It happened with 400000 people most in the private sector. Government led the way. It didn't micromanage. There were so many different sectors involved nutrition materials electronics software because they're all these homework problems to be solved along the way of which many failed. The success has got his camera phones foil blankets baby formula so on and so forth. What would it look like to actually treat the sustainable development goals as seriously as wartime scenarios or in that case a military industrial complex project turning all the SDGs or 17 of them not just into those 169 targets but into bold missions that sit somewhere between challenges which is what the sustainable development goals are and all these different sectors that must you know be catalyzed in order to create a serious multiplier effect that doesn't happen just with bigger government right. You need bold government. That's why your question so important. You need capable government. You need strategic government working dynamically symbiotically with the private sector. Another thing that NASA did was to put into the contracts with the private sector. No excess profits. They didn't say no profits because you don't get to the moon through charity or philanthropy philanthropy is important. But as icing on the cake it's not the cake we need good government good business working together. But just the fact that NASA took the time to design that into the contracts is super interesting. The other thing they did was to change how they did procurement. They moved away from cost plus procurement which wasn't really getting much innovation towards outcomes oriented fixed price procurement with incentives for innovation quality improvement. So that idea that bold government is about taking time to structure grants loans sovereign wealth funds procurement to catalyze as much economy wide innovation will only happen with a confident government that's not de-risking the private sector but truly welcoming the underlying uncertainty member Kennedy's point we're doing it because it's hard not because it's easy but also to really also share not just the risks but also the rewards I'm not sure to say about that but I feel like I'm talking too much. But how do you share the rewards that also doesn't happen just by talking about purpose orientation. It happens through contracts intellectual property rights equity stakes prices of drugs that are publicly financed. How can it be that we don't think about getting the prices right ex ante. It happens through sharing knowledge like we should have done during COVID. Some companies did AstraZeneca because Oxford forced them to share the knowledge where some of the other vaccines didn't. Thank you Scott your view on the same question that risk of crowding out the private sector. I'm less worried about that. My you know I look at things from the ground view level we we have about five hundred and sixty portfolio companies around the globe big concentration the U.S. Europe China primarily but in other places. And so what we see is the impact of government on our companies and in some cases it's very positive and in a few cases it's really frankly killed companies. And it's often through I was I was thinking very much Mary on about a company fiscal automotive which had a loan from the government which was pulled immediately when there was a story about another startup which had failed and had government money. It was a political political decision. It killed a company that I think would otherwise been quite successful. And that was a bit of a tragedy since eight hundred million dollars had gone into the company. So yes governments can get it wrong. But on the other hand you know I don't have anywhere near the experience that Kaifu Lee has in China but I started investing in China in 2003. And he was nice enough to remind me before the conference about a guy that I met the first time I went to speak at a national conference of venture capitalists in China. This is a fellow named Chung Sway. And I was so deeply impressed because I was one of five non Chinese guest speakers and I expected in 2003 to have the National Convention of venture capitalists be composed of fewer than the number of people in this room. But instead there were eight hundred. And you know much to my surprise this fellow Chung Sway who was the number two person in the Chinese Congress at the time and probably about 70. I had a chance because I was a speaker to talk to him. First thing I noticed he spoke fluent English. And then he went on to give a speech about venture capital and the best practices which would match anything I you know anybody I knew could give. And it turns out it was because he had gotten his PhD in 1986 or something at UCLA and his his thesis was venture capital or about venture capital. Why was that. It was because the government was so far sighted as to identify that as something of interest to the development of China and sent you know people to do that. And so what I saw then from 2003 for the next 25 years is an you know as as Kai Fu Lee said you know there were there were things that in retrospect look like maybe mistakes or they were certainly losses. But they set the foundations and they spurred the rate of development of the venture capital ecosystem to as we all know now roughly the size of the U.S. venture capital system in 25 years. I think it was a year was even bigger. So I think it's you know when I when I sit here and think of what the government leaders on this panel are thinking I think you're absolutely right that if you want to. If you if you do it the right way and you're trying to solve problems and accelerate solutions there are ways to do it. Thank you. Let's pick up on that. Doing it the right way and the skills and capabilities that exist in in governments. As you saw there's a very mixed picture and many people even advanced economies don't feel that their governments have those skills and capabilities may not be in the right position to make those long term big bets. And even if it's oriented towards public big public good challenges may or may not have the capabilities and skills. Perhaps President Harman over to you first. Singapore obviously known very well for both the public sector skills and the private sector skills but maybe getting a bit more specific about those long term bets. How do you build up the kind of human capital and other capabilities that are needed to do that well. Well I'll make two points that first both learning from past experience across a range of countries including our own and several other countries in East Asia for industrial policy to succeed. It has to be accompanied with social policies on an industrial scale. In other words a systematic approach to developing human capital and that requires first and foremost obviously education systems that are for everyone providing a high quality education for everyone. But very importantly in today's new environment it requires a constant replenishing of skills. And it's very hard to get it right because you can't actually bet on specific skills that are going to be relevant five or 10 years from now. But you do know broadly speaking that digitization is going to be important. AI is going to be important. Robotization is going to be important. There's a whole set of green energies that are going to be important. And you know that there are clusters of skills required in each of these areas. You might not get it precisely right but you can get it roughly right. And you've got to do that roughly right with some gusto. And it requires again the public sector to participate. It requires mobilizing employers very importantly and it requires motivating individuals. And that new generation of social policies which not many countries are adopting is to my mind extremely important the replenishing through life of what you'd call human capital investment. But it's really investing in the skills of ordinary citizens. I think that's extremely important. And the countries that do pure industrial policy encouraging an investor foreign or local to plonk a plant in a particular town. And thinking we've succeeded there will find over time that it's going to cost more and more because you don't have the skills ecosystem to sustain it and you have to keep subsidizing. Thank you. Minister Ibrahim how are you building up those capabilities in Saudi Arabia specifically within the government. So maybe I'll just take a step back and say Vision 2030 which is our plan to diversify our economy also hinges on two other key areas which is empowering the youth. Locking the potential of the youth to improving human capital development outcomes and continuing to do that. We're a very young nation but also building continuing to build institutional capabilities. We have a legacy of strong institutions but under Vision 2030 stronger institutions are taking shape and you don't have to choose do I build capabilities first or do I think you should do both. We decided to implement Vision 2030 and build capabilities at the same time. And if you truly think long term and you want to build capabilities you'll start with people because that's the best thing you can do. Like I think what President Thurmond was talking about. And in terms of building capabilities either through actually improving the work conditions improving continuing to improve education and health care offerings but also our ambition leads to more pressure in terms of what we want to achieve. But also partnerships. We're partnering with institutions from all around the world. We're partnering with governments as well. We have a partnership with Singapore on strengthening the capabilities of the public sector that we're very proud of. We acknowledge the success story there and we want to learn from it and also contribute to its evolution. I want to comment on the link between that and the question about crowding in or crowding out the private sector. In Saudi we looked at the vast assets that are available that are idle and we started thinking about how do we mobilize these for the betterment and for the contribution of our national towards our national objectives. PIF was one great example of how that happened. PIF today is not just only investing for returns but contrary to the belief that you can't really achieve double bottom line PIF is also creating the environment in which returns can achieve through a developmental lens. So not just returns driven but also developmentally driven and in that regard PIF has built in parallel to its mobilization of these assets and resources and organic capability that today is working with the best and attracting the best talent from around the world. It jumps into sectors either leads them or mobilizes them or invests in them for strategic or returns purposes and crowding in the private sector is not a byproduct that is a good to have it's something that we must do. Today it's part of the evaluation process. PIF has a dedicated department for national sector development and on top of that it has created partnership models co-investment platforms such as as far and tourism investment company that invests 50-50 with the private sector. Funds are funds such as Jeddah which is investing in fund managers and also it looks at exits. It leads it transforms and then it recedes itself sold down some of its assets and it's also IPO with a lot of its asset assets and also in the evaluation process today. Maybe it was in the beginning but today we look at how this investment opportunity that's presented by a certain investment team. How is it going to crowd in and increase the participation in private sector from the get go. Not just at the end of the investment horizon. Thank you. Mariana you've been working with many governments around the world. Who's doing this well. Who's building up their talent and capabilities for investment. So I mean I think it's interesting not necessarily to look at countries but examples within countries where there was investment in what I call the dynamic capabilities of the public sector. And that means actually taking care to as I mentioned before redesign or rethink kind of everything right. So you know for example in Germany because they have this very high level vision mission you could call it of the energy vendor. That required them to then change how their own public bank the KFW was giving out loans precisely in order not to crowd out but to crowd in. But the point was not to crowd and crowding in is not the objective. Working together with lots of different actors is the objective if those problems require collective intelligence. So the loan in Germany given to the steel sector for example was conditional on the steel sector lowering the material content of production. How they did it was up to them had the German government through the KFW told them exactly what to do that would stifle innovation. But that capability of for example thinking about again directionality. We want a green transition. This means changing those tools catalyzing bottom up innovation in the private sector. But that does mean not just giving out subsidies guarantees loan with no conditions attached. So that's an interesting example. The U.S. for example recently did have big government right. Lots of money between two and four trillion. If you know depends what you count. But that's not the interesting bit. The interesting bit is when they actually took time as they did with the chips act to build in a different relationship with the semiconductor company. So again there there's conditions attached to make sure that semiconductor companies are truly innovating that there is real conditionality. So conditions about not using. I mean it's kind of not rocket science. It's incredible. It has to actually be said but if you're getting 400 billion from government you're not going to then use the profits that come from that just for share buybacks. I was put in in the context of seven trillion dollars having been used for share buybacks in the last 10 years by the global S&P 500. They put in conditions to make sure that energy efficient supply chains in semiconductors were used better working conditions so on and so forth. In Denmark they have for many years actually been investing within their public service. So they had an organization called Mind Lab. And it was within the civil service precisely to kind of stimulate and encourage risk taking and finding crazy solutions that could be tested. Countries that have gov labs in Chile. They have a laboratory of the government. Everything sounds better in Spanish which is a safe place within the government to experiment precisely on those things like outcomes oriented procurement that I mentioned before which again without that we wouldn't have gotten to the moon without that we wouldn't have gotten vaccines or even personal protection equipment during covid. So all these things like portfolio thinking which you kind of gave an example of that which I'll say something quickly about it because it also goes really wrong outcomes oriented procurement digital government. Right. Because even with the health pandemic there is an infodemic side of it. Countries that had actually invested within their civil service to be able to deal with digital platforms did do better. Just one quick thing on portfolio thinking which I think is important precisely so governments don't put all their eggs in one basket but really do catalyze that economy wide change with additionality crowding in. It's really interesting what happened in the US after the financial crisis. First of all they didn't do austerity in the UK where I live. We just kind of blame the public sector for what was actually a massive amount of private debt. So they had an 800 billion stimulus program while Europe in general was cutting. So small government big government. But they didn't just do big government. They said we're going to try to have it directed towards green. That's what got them able to actually bring in really good people into government. So Steve Chu a Chinese American Nobel Prize winning physicist on the back of that announcement that there was going to be a large fiscal stimulus around green said I'm happy to come into government. He wouldn't have come in had they just said we need you to set up a carbon tax or do you risk Elon Musk. He ended up being the head of the DOE. He set up ARPA E which was modeled around DARPA which got us the Internet. Hired Arun Majumdar who later ended up running a Google's energy program but they also in the DOE ended up having these guaranteed loans to companies. Everyone knows about the Cylindra one because they went bust about 500 million guaranteed loan by government. Almost no one knows that the same amount of money just a bit less went to Tesla. Right. So first of all again that propaganda bit they said at the beginning when government fails everyone knows when government succeeds somehow we say that was entrepreneurship but how they set it up made very little sense. They said to Tesla if you don't pay back the loan we get three million shares in your company. Why would you want three million shares in a crappy company that doesn't pay back the loan is beyond me. Had they said if you pay back the loan which they did because they're a good company they paid it back in 2013 we get three million shares in your company. The price per share went from nine to 90 multiplied by three million would have more than paid back that Cylindra loss in the next round of investment. That's an investor first resort mentality. That's a cultural shift. So even in a country that is actually investing in the technologies in your iPhone or having that bold idea about greening an economy actually requires also that savviness on the investor side and also making sure that the taxpayer is not just bailing out the failures but also getting some of the upside not in terms of nationalization but in terms of smart governance. Thank you. So speaking a bit about those capabilities that savviness Mr. Lee do you see any government being able to do what you did getting to unicorn status in less than eight months time. I mean do you think the same kind of dynamism incentives skills exists to be able to get that done. Well I think sovereign funds and governments have to be cautious because on the one hand they need to understand and see the big trends and make sure that in that country these trends get to emerge the way they deserve to be and accelerate their growth. Secondly I think every country should want to have a good private sector venture capital private equity firms. So there needs to be sort of a division of labor win win proposition which implies that the government might start. I see many many successful sovereign funds starts by essentially being a fund of funds. So so that simultaneously trains the VCP ease and feeds back later for the sovereign fund to gain knowledge of the industries and then it can take on things like as mentioned earlier. Co investments. These are things that are very much alignment of interest which is very important investment so that basically the model could be the sovereign funds as this area is important. VCs aren't doing it. I'm going to give the VCs money be an LP be an anchor LP to make their fund raising easier than as they go in and invest in private companies the good ones or the appropriate ones that later rounds the government comes in as a co investment. So that's an example in the ecosystem setting. But now the other questions or what are and the other thing is I think the governments ought to pick things that are not naturally areas that would happen organically things that have a good cash flow that can make money quickly private sectors will figure those out. They don't need national nudging where this nudging is needed. I gave an example earlier about new energy. Another example is early stage startups. So this I think began in Israel. I think Singapore built on that and then China learned from Israel and Singapore. Basically these governments either at local level at central level basically says well early stage investment is really tough. High likelihood of failure. VCs don't get the same kind of returns.  So the government might make some incentive to to help to provide even more upside to the VCs and angels. And that has worked very well for a number of countries including China Singapore and Israel. The last point I would make is that sometimes the government might spot and really important not only technological trend but a need to provide self sufficiency. So I'll give the example of the company I'm building now. My company builds large language models. But we believe that unlike previous operating systems like Windows and Android which are just technology large language models actually represent each country's culture needs cultural norm and biases and values. And those do differ country to country. So a model built in the U.S. will not work in China or won't work well in Saudi Arabia and one building China probably won't work in Singapore and vice versa. Of course the foundational technologies are the same. Open and Google have no intention of pushing Americanism. But the data they collect is largely American. And the alignment process trains it to American values which is great for America and probably good for countries close closely aligned with U.S. like many English speaking European countries etc. But I think every country needs its own model. And for that to happen. No VC no entrepreneur is going to stand up and say well we're a country of 10 million people. I can make a business case of buying you know 100 million of GPUs and then build a language model and make money in the next three or five or even 10 years. So that is where I think the sovereign fund or a national priority might step in and say hey this technology will change the world. And we can't for now use technologies built by another country. Yet the entrepreneurs aren't going to naturally get funded by VCP ease. So I think we're going to go make this work. I mean fortunately I built zero one dot a I in China where there is large enough a population to make an easy business case. So normal investors private investors invested in me. But I kind of take what I do and project it to other countries. It's going to be much harder to make that business case. So I think I would encourage more countries and sovereign funds to think about you know what are the big technological trends. What are things that they can't depend on other countries. Because the national needs are different or the usage cases are different and how to encourage what might initially look like a not the great investment. But it will lead to a big ecosystem as well as building a brain trust that really makes all the difference in the long term. And Scott your view on that division of labor between public investors and private investors. What are some of those big areas where public investment should go versus private and particularly in the American context. Well it's notable in the U.S. context I think most of the pension funds are relatively passive investors in private equity. But as I feel he said there are there are countries where that has progressed from fund of funds to fund of funds plus direct investment. And ultimately if you look at Tomasa can Singapore for example you know that's they make they lead direct investments and and have done it very well. So I think it depends a little bit on what the situation of the country is. You know if you're if you're trying to jump start a new ecosystem you're going to have to be much more aggressive. That's what I described China having done. But even a country like Australia has set up the future fund. I don't know 20 years ago. We are you know they invested in any a started making direct investments in our company. And you can look at their results. I think it's public record. They've done incredibly well for the citizens of that country without necessarily having the goal of supporting an ecosystem. So to me it really depends what you're trying to do. And I think it's it's fascinating to hear what the models are that have been tried around the world. But it seems like there's a lot to learn from. Can I just add something about venture capital because it keeps coming up as this like good thing. It depends. And I mean I I think venture capital has had a hugely dysfunctional role in many parts of the world including the U.S. that we should learn from in order to create functional venture capital. So the fact that it's so exit driven. And sometimes that exit is kind of three to say seven year cycles. That's not patient finance. So that's fine for gadgets. But it doesn't get you. You know the kind of revolutionary change that we need in different sectors like the ones that you were talking about. So in the biotech sector for example exit driven V.C. got us a lot of plipos. It sounds like a disease but it's productless IPOs. The venture capital sector in the U.S. also played a hugely dysfunctional role in terms of tax policy. The ones that lobbied initially at least for capital gains tax to fall by 40 percent in five years. And a lot of the capital gains tax reductions globally don't differentiate long term investments from short term investments. So I think especially in a panel on innovation let's learn from the mistakes that have been applied or how do you say designed into the way that venture capital is structured. And also in terms of sharing risks and rewards the whole to 20 model itself could be you know questioned on whether you know it's fair. And if you look at the health sector I mean I just know this because it's sort of obsessive about looking at sectors properly over there kind of 50 to 100 year cycles in the U.S. for example it was the National Institutes of Health that recently are spending about 40 billion a year that have invested in the early stage high risk drug innovation with V.C. almost always coming in later. That's fine. Not a problem. But then let's admit that that's the division of innovative labor and ask what does that mean for the division of the rewards. And that's going to get a smarter policy. Thank you. And President Armin if I can come to you with both that question around divisional but also is this really about crowding in and out long term short term or is this about partnership. Well I think with today's new industrial policies particularly the largest industrial policy experiments underway today. The risk is not so much about crowding out private capital. The risk is of crowding out other countries. And in fact the motivation for these industrial policies have been twofold. Part of it is good which is driving down the costs of low carbon or zero carbon technologies. You know accelerating that shift in the cost abatement curves. That's all good. But the other motivation which is not disguised is geopolitical. It's about achieving a lead over someone else. And it goes together with other policies which are in WTO terms straightforwardly protectionist. So it's a complicated game. And the real risk is of countries with the deepest pockets or the ability to borrow the largest amounts of money without suffering a credit rating loss being at an advantage over the rest. The reason is because this generation of industrial policies works by offering subsidies, large subsidies and the deeper your pockets the more you're able to offer. Now if you think about it compared to countries which are adopting what economists would call first best policies which is carbon taxes or carbon pricing and you hope that that will incentivise low carbon technologies over fossil fuels. The country that offers subsidies is at an advantage because it's also just lowering the overall cost of energy. It's not just slanting subsidies towards low carbon. It's also lowering the cost of energy compared to the country that's going for the first best policies of pricing where you're not only encouraging low cost carbon, you're also raising the cost of energy and encouraging energy conservation. And that's really what's happening globally today. The country with the deepest pockets is crowding out other countries. It's going to be a situation where, well first the jury's out as to how well you succeed in the long term when you mix up those strategies.  You slow down the rate of investment in innovation globally. And our experience has been that in all leading industries getting competition globally and investing globally and having global supply chains that come from all sources. I mean if you look at ASML for instance, ASML is actually a very complicated global network leading to those lithography, those very advanced lithography machines. But it's a very advanced global network with everyone investing at the frontier within that network. Once you start nationalizing the process, there's a very high chance over time of a slow down in the rate of innovation. Some countries might be up, some countries might be down, but the global rate of innovation goes down. So I'd say we've got to have a care for how we mix up strategies to be realistic. Countries do want to be ahead, but it's got to be, if it's got to be in 80%, I put in the effort to develop my capabilities. 20% I try and make sure someone doesn't catch up rather than the other way around. Thank you. Unfortunately 45 minutes goes by really fast with such an incredible panel. And so I'd like to just do one final round and I'll start with you, Scott. Your outlook for innovation, public or private sector led, do you think there is that risk of a global slow down in innovation? And that will be the final round, final question that I'll ask the full group. Starting with you, Scott. Well, I think there's an enormous amount of innovation underway, probably more than any time in my 30 year career doing this. There's also, you know, a huge aversion to risk and capital going into the startup ecosystem went from 700 billion to 300 last year, you know, span of two years. So, but I actually think that's healthy. And I think the right kinds of innovations will largely survive. And the kinds of technology that is coming along today, most notably artificial intelligence will create unbelievably good things. So I'm not, I'm not that worried about it, although I think there will be a lot of casualties. Thank you, Mariana. So the opportunities are there, but they won't bear fruit unless we make massive changes to how we do capitalism. So the first thing would be to de-financialize our corporate sector, as I already mentioned, 7 trillion. That's huge in terms of share buybacks. That's the same financial gap, by the way that people argue is around the SDGs. Second, we need proper purpose oriented partnerships. I've been arguing for mission oriented government working with purpose oriented business together and big problems. But again, designing those partnerships contractually right ex ante so we don't pick up the mess. Exposed. And third, I'm sorry, I keep studying my books, but my latest book, the big con was how the consulting sector, so the McKinsey's and PWC's, it's not even their fault, but governments have outsourced a lot of their capacity to the consultants. So we need to insource that capacity. There's definitely a role for consultancy, but not instead of investing and training the civil service and also making them happy again, and calling them at best lenders of last resort or market fixers or facilitators is not a good way to insource top talent and then to also train the civil service to help create value, not just to redistribute, regulate, administer, and you want to kind of fall asleep by the end of that paragraph. Thank you, Kai-Fu Lee. Yeah, I'll follow suit and sell my book too. In my book AI 2041 talks about all the technologies in the future from AI to biotech to quantum computing to drug discovery. And I think the opportunities are just so so large. And I predict actually that we will reach within the next 20 years the age of plenitude when AI and technologies do work for us, and we will be able to liberate ourselves from having to do routine work and do what we as humans really want to do. So with that, it shows a huge amount of optimism. We face some challenges in the capital market. A lot of ECs and investors want to see cash flow and make money. And that's not the way you invest in the early stage, but I have faith in the entrepreneurs in the world that we will make these technologies happen. Thank you, and ministry. I have a book to sell, but I think Saudi has a playbook that everybody is looking into. And this playbook is all about bold movement, like Mariana said, and learning by doing. It's about global collaboration and partnership. I don't think it's always competition, although competition is good. I think the state of innovation, if we really put our heads together and if we say it's not either or. I mean, every country wants to be resilient, especially today. And it wants to be a co-author of the future of many of these sectors and technologies. And it's only fair that it wants to take a lead, but that doesn't mean it can't collaborate and kind of put forces together. The green energy transition won't succeed without true collaboration, investing in accelerating innovation and technology. And I really think, you know, impatient capital doesn't go against thinking long-term. In Saudi, we wanted to accelerate our diversification fast. We went in. We created the environment in several sectors. We prioritized 13 that created the conditions for profitability for private sector. And PIF has the largest fresh capital deployed in 2023 at $35 plus billion. That's not patient capital. At the same time, PIF in 2022 crowded in $60 billion of private sector investment. So these two things can work together. And I believe truly that this is the time where collaboration can lead to acceleration and innovation. Thank you. President Harman, you got three optimists about the future of innovation, and one, it depends. What's your view? Give us the final word. Well, I think we should just keep in mind that we are way behind. We are way behind in the race against climate change and a broader crisis in biodiversity. And the way to tackle this is to rely on superior technologies and innovations wherever they come from and scale them up. Guard against unfair competition, unfair subsidies and the like, which many countries are guilty of. But choose the most superior technologies and scale them up regardless of which country they came from. That's going to give us the best chances of tackling a problem that we are still way behind in tackling. Thank you, President Harman. Thank you, Minister Ali Brahim. Thank you, Kaiful Lee. Thank you, Marianna Mazzucato. And thank you, Scott Sandel. Big round of applause.


Thank you for the opportunity to speak with you today and to make what I hope is a useful contribution to the overall theme of Outlook 2016 investing in agriculture growing our future, but more specifically this session investing in innovation despite uncertainty. I once heard an interesting comment by a HR director of a business that was investing heavily in training their staff only to find that many of those staff ultimately left the business and when line managers were complaining and saying what if we invest in training them and leave the HR director responded what if we don't and they stay. So investing in innovation I think is a bit like this in times of rapid change whilst it's not always possible to predict what will happen in the future I think there are in fact quite a few things that we can be certain about rather than uncertain. Firstly consumers have changed they know more and they expect more and they have more choices they demand products and services that meet their needs and not ours competitors are changing they're more of them and they're becoming smarter and more proactive sadly Australia no longer sits in the number one position for red meat exports as it did when I first joined the industry. Technology is changing and changing rapidly there are now more ways to automate to analyze and exchange information and to make better decisions faster and markets themselves are changing with new regulations trade agreements and populations that are shifting and have aspirations to have access to safe and healthy food to feed their families. So we know these changes are complex chaotic and even uncertain but what what if we don't invest in this future most of you will be quite familiar with MLA and what we do our job is to work with industry and government partners to try and make sense of this uncertain future and to determine those areas of investment in both innovation and marketing that will deliver the greatest return. My presentation today will focus particularly on how MLA is using deep insights to help our industry to uncover new innovation and growth opportunities. In addition to investing levy funds in innovation MLA also has the opportunity to co-invest additional matching Commonwealth funds via voluntary contributions from external parties. We do this via MLA donor company or MDC as we call it which is a fully owned subsidiary of MLA. These funds are invested in a wide range of innovation projects as you can see here that deliver benefit across the industry and fundamentally what we're trying to invest in is the development of new technologies and and processes and building industries capability. I was very interested this morning to hear how adoption of new technology is one of the things that's going to make our sectors more investment ready and I think this is one of the things that we're particularly interested in looking at through our donor company mechanisms. Currently we have a portfolio in excess of a hundred million dollars in the donor company and expenditure this year will be about 32 to 35 million dollars. It is important to note that no MLA producer levies are invested in these projects. MDC as I said provides our industry with a fantastic opportunity to increase their investment in innovation while at the same time reducing some of the risk and uncertainty. It also provides us at MLA with clear signals about innovation priorities and reduces the adoption risks via the direct engagement of commercial partners. I'd now like to provide you with a brief snapshot of how MLA is planning to extend our global innovation strategies so as to support the industry to capture high value growth in emerging markets over the next three to five years. MLA's global innovation investment framework is based on three key pillars. At the centre is market access which is fundamental to securing the industry's long-term competitive position. Our programs support governments efforts to open new markets and to reduce tariff disadvantages such was achieved with the recent free trade agreements with Japan, Korea and China. We also invest in food safety research to ensure our industry is at the forefront of scientific and technical advances and can provide credible evidence to counteract technical barriers to trade. The aim of our market intelligence and insights program is to ensure that industry and commercial partners have the best possible information to underpin trade and business development in market promotions and brands, developing new premium products, ensuring our integrity systems meet customer expectations and more recently in designing new business models that allow us to move further up the chain and capture more value. I think we all know that there are significant opportunities for Australia's agri-food industries to capture advantage from the rapidly growing markets in our region. Many analysts in fact believe that this is a once in a lifetime opportunity and if we don't get this right our competitors will simply run over the top of us and our hard-won competitive advantage will be lost. In 2015 MLA was fortunate to be awarded a grant under the Rural R&D for profit program, a particular initiative of our Deputy Prime Minister to fund a project which has the specific aim of making sure that producers and their value chain partners have access to deep knowledge and insights that will help them make better decisions about where to invest to grow their businesses. MLA is leading this project which is a collaboration across six sectors involving red meat, horticulture, dairy, seafood, wine and pork. Our target is very much about discovering the what's next, the second horizon. We know we need to make smart innovation investment decisions now across a range of areas that you see here. If we are to help the industry sustain strong growth in value more than volume over this next three to five year period and belong beyond. For this project we've identified a number of key targets for the development of these global innovation investment strategies. China which is probably the obvious one, Southeast Asia which is clearly more fragmented one and the Middle East which is perhaps for some the more mysterious one. And there are also some market segments which whilst very visible have been virtually ignored by consumer researchers and innovation planners to date. One of these is the ageing population which is rapidly changing and it's not only a growing force in Australia it's also likely to become a dominant segment in some key markets such as China and Japan. This segment has very different expectations and requirements from the food that they consume and purchase and we need to start thinking about how we're going to service their needs. I should say our needs in many cases. What I would like to do now is to briefly give you a flavour of how we are using insights to reduce some of the uncertainties about where to invest in innovation to drive high value growth in China. This is just as an example and we're doing the same sort of thing in those other markets and segments that I described. We all know that the growth of the urban middle class in China is huge and that Chinese consumers appear to be willing to adopt new food trends, Western diets and that they favour imported products at least for now. But what can we do with this information? What does it tell us in terms of investments in innovation? Clearly our agri-food industries cannot hope to satisfy all of the demand in China and nor would they want to if this meant giving up our long-term stable markets elsewhere. Some say we should position ourselves as the delicatessen of Asia which simply means targeting niche segments with premium innovative products. But this still doesn't really provide our commercial value chains with enough information to guide their investments or growth strategies. So what have our China deep dive insights revealed so far? Clearly while China is one country it is in fact made up of many different markets and a simplistic one-size-fits-all approach won't work. There are many different supply chains operating and emerging within China from simple models such as you see here with all of the obvious cold chain challenges right through to one of the most sophisticated e-commerce food environments in the world with complex logistics challenges that are still being sorted out. Many of these challenges may appear to present insurmountable constraints particularly if we apply Western thinking. But if we adopt a new lens they could also present us with first mover advantages if we explore innovative new design-led solutions. What is obvious is that simply trying to sell our products into this market is unlikely to win us a position. The food marketplace in China will continue to evolve and is likely to become a unique blend between the status of Western brands combined with the attributes that address deeply held cultural preferences and traditions. The green tea cakes that you find in Starbucks in Shanghai for example. These are nuances that we must become the best at understanding and servicing. So in response to this early work we've now developed a comprehensive China insights implementation plan. Our goal is to make insights accessible and actionable. Summarized here are some of our key initiatives which include firstly developing an innovative scorecard approach to help industry identify the most attractive areas for future growth. We're looking to find the sweet spot between opportunity or the size of the prize balanced against the best fit with our capability and supply constraints. We want to understand the ease of doing business and the impact that high levels of competitor activity could have on our future success in particular cities or geographic locations. Similarly we want to map the value chain options and identify top customers that industry partners should be seeking out based on more sophisticated customer segmentation approaches that lead to greater alignment. And we've also initiated a number of activities to ensure industry partners are engaged. Our value chain flagship demonstration projects will look to identify those value chains that want to work with us and to adopt some of these insights. We've just launched and you can find on our website a young food innovators traineeship program which will seek to attract bright young professionals into our industry that can bring fresh new ideas. We've already started our in-market immersion program for producers. We took a group of West Australian sheep producers and their value chain partners into the market last year and we're looking to share this knowledge both in online and face-to-face formats. You may have noticed on the previous slide that one of the key themes within this China innovation strategy is food without fear. This is a well-known but not necessarily well understood opportunity for Australian food in China. To achieve premiums in key Asian markets Australian food exports rely heavily on the promise of our world-class integrity systems and the delivery of food that is perceived as clean green and safe. In the red meat sector we have our true Aussie beef and lamb brand which is now globally recognised. But what is definitely starting to emerge is that this may not continue to be a value proposition that is uniquely ours. Many of our competitors are in fact already selling the same promise and if we're not vigilant and I would propose if we're not innovative we could very easily lose this position of competitive advantage. When I was on that supply chain tour in China last year I spoke to our major customer a company called Grand Farms and he was telling me that he definitely sources products from those countries that he believes he can trust Australia, New Zealand, Uruguay, Canada and one other that I've just Ireland. And when I said to him would you be considering putting a true Aussie brand on the product he was very appreciative and very happy to do so. And then when I went through his production facility and saw that there was no way he could actually differentiate his raw materials from those various countries I asked him further you know was he going to put a true Aussie label on those products and he said yes. So when I asked him through the interpreter how he was going to achieve that kind of level of traceability he looked at me a bit quizzically and said well I'll process Australian meat on Monday and New Zealand meat on Tuesday and possibly Irish meat on Wednesday and I said as I turned away don't give him any true Aussie stickers because obviously he doesn't differentiate the country of origin. For him each one of those countries can provide the promise that he's looking for and he he now believes that we need to compete only on price. I found that very distressing. So what is our innovation response to this? We believe that true insights into what constitutes a genuine opportunity for maintaining premiums for Australian food requires a much more sophisticated approach. Our innovation responses must be much more than simply strapping on the latest anti-fraud or anti-tamper device that has hit the market and many of them are. We cannot and we should not make assumptions about what consumers and customers mean when they say they want safe food. We must understand what they're willing to pay for before we jump into investing in complex and costly technologies and we must be clear about what the core problems we are trying to solve. It may be that a smart new value chain design is where the best solution lies and we heard more about that this morning. So as I indicated we're now extending this broad approach that we've been using for our deep dive insights into China to look at opportunities in other key markets and market segments and we're hopeful that the leveraging and synergies that are rising from the cross-sectoral collaboration will help us to get there faster and more efficiently. Before concluding I'd like to suggest that for investments in innovation in the agri-food sector to provide a comprehensive approach to dealing with uncertainty they should clearly encompass a balanced portfolio between productivity and value creation on the demand side. Many of you may already be aware of some of the exciting new developments in automation that we've been able to deliver for the red meat industry which has been supported by co-investment from commercial industry and technology partners. Technology has been automating processes for over 40 years now. We've taken that substantial history and commenced automating meat processing systems and in partnership with JBS and Meat and Life Stock Australia we've developed the world's first lamb x-ray primal and middle system. What we've seen so in the interests of time I'll just show you a little snippet of that one. These technologies are world leading and we'll go a long way towards improving off-farm productivity in our sector and ensuring the long-term economic sustainability of the industry overall. In addition to the transformational impact of the automation itself we are now also able to leverage sensing and measurement technologies that will further disrupt and define our industry. Those of you who are just in the digital agriculture sector would have heard Alex Ball speak more on this. Investment in innovations that underpin and enhance big data analytics and digital information systems cannot be seen as an optional extra. Whilst complex this is not an area of uncertainty for the future it is clearly where we need to head. So my concluding message is that despite uncertainty investment in innovation is critical to the future success of Australia's agri-food industries but I guess you already knew that. What I hope I've been able to share is how our approach to seeking deeper insights will help to declutter, demystify and de-risk the decisions about where to invest in innovation. Ultimately we want to help our industry become better connected. Connected to customers and consumers so that products and services absolutely hit the mark and are not hit and miss. Connected to best in class researchers and new knowledge and technologies wherever they are. Connected with passionate young professionals who will lead our industry into the future. Connected and investment ready to attract new sources of capital and better connected with each other as empowered participants in smart value chains that deliver high value products that attract premiums. This is what I believe will set our industries apart. Thank you.


As Andy said, it's Dean Peterson, Russell Bands, his crew, Cal Larson, Corey Ingram that do all the hard work out here and I mean I just have to say this place looks awesome. I'm really glad Andy that you indicated that those weeds were supposed to be back there. I got a little nervous about that when I came. So we have continued here the work that has been done for years. I guess I think we've been out here for maybe ten years or so, NDSU potato pathology and so I'm just continuing that work. What you see behind me are really these three blocks of trials that are early blight, foliar fungicides, foliar fungicides for brown spot as well as for black dot and I think the guys told me this year that we have over 140 foliar treatments and they're not impressed by that at all so hopefully next year we're going to have fewer than that. And really the crux of all of this is looking at how we can better control these foliar diseases and Dean's passing out a handout there. I don't have a handout or Dean and the guys are. I don't have necessarily a handout of these trials. We are having a little bit of a hard time getting disease growing that hot and dry has put us back a little bit but we're hoping to get some good disease data out of here now that it's cooled off a little bit. And a lot of these treatments are things that are up and coming still. Companies just want us to kind of keep that on the down low a little bit but it's really important for us to be able to look at these compounds for you under your growing conditions so that when they are released we can say, yeah, you know what? We looked at that, here's what we saw, here's what the data say and here's what we can recommend and so really find that to be a very important part of what we do. And so we will, with the support of the growers, with the support of the NPPGA, we will continue to do these sorts of trials to really be able to make those recommendations for you. As far as our recommendations are concerned they really haven't changed over the last couple of years. We're still looking at fungicide resistance in the early blight pathogens and the brown spot pathogens and a little bit in even into the black dot pathogen. And so that we can again kind of keep ahead of the game what you're seeing in your fields, what you need to be spraying, what's going to be efficacious for you. And so one of the somewhat new projects and this is on the hand out there, somewhat new project that we have going is looking at brown spot a little more closely. Over the years, Neil and his group looked at early blight very closely and for years and years and years we did that work. But probably about, starting maybe about 20 years ago, when I was working in Neil's lab and working on my degrees, we would keep, you know, look at this brown spot, we got brown spot, can you isolate the pathogen, can we keep that?  And I'm like, what are we going to do with these? Well, probably a couple of years before he retired, he started working on brown spot. So the beauty of this is, at all of those isolates, all those pathogens that we collected, I started collecting 20 years ago, we're now doing research on and that's what's in your handout. So we come full circle around. The importance of it is, we know a lot about the early blight pathogen. We don't know a lot about the brown spot pathogens. What we do have learned in the last handful of years is that some work out of Pacific Northwest indicates that we have not just one fungus that causes that disease, but at least three, maybe four. And so we started looking back at, I said, you know, we have all these isolates that we've been putting in the freezer for 20 years. We started looking back and what we thought was one pathogen 20 years ago was really three at that time. And it's technology, it's today's technology that can tell us that we actually have three different pathogens that are causing the disease. It's important because what we don't know right now and we're still, we're kind of looking at kind of parceling this out, is one of these fungi more aggressive than the others. So we know we have three in North Dakota. The most common one is actually decreasing in prevalence. And you can see that in those graphs on that paper there. And some of the others are starting to increase. Well, what does that mean? Maybe nothing. It might mean absolutely nothing to you in your fields. But we don't really know that. We need to look at the aggressiveness. Why are these other species increasing? And the main species, if you will, decreasing. Are they more or less susceptible to certain fungicides? We don't know. We started to look at that when a Niels graduate student started to look at that and we're continuing that work. And so that's really kind of the crux of that work on Brownspot to really kind of figure out why is it changing a little bit and how is that going to affect all of you? And if you have any questions on that or anything else for that matter, please let me know. I talked this morning about soil-borne pathogens. Let's back up a little bit. So Gary talked, and I don't think he's going to speak this afternoon, but kind of what's happening? What have we been seeing out as far as the foliar pathogens are concerned? Well, of course, we don't have any late blight here. As Gary said this morning, they have found some late blight a little bit in Wisconsin, a little bit in Maine, and I believe a little bit in Ontario. And that's all the reports that I've heard of. You know, with this kind of weather that we were having, of course, we're not going to see any late blight here. I think early blight even as well due to the heat and the dry has not been as prevalent as we have seen in previous years. Verticillium wilt is really starting to kick in and that stress that those plants were under early and really mid-season is really starting to show up. A lot of reports of fields going down early and that sort of thing. So I think the verticillium wilt is really raring its ugly head. We have, I have for many years worked on verticillium wilt and we continue to do that. Some of the most exciting things we have going forward with verticillium wilt are our work with Suzy Thompson and Laura Shannon on looking at really digging into the resistance to verticillium wilt and really, really getting a much better understanding of what's happening there. And the three of us have a couple of new projects going forward and I'm super excited about that. I think that we make a good team. We all have some varying things to offer and super excited about that relationship going forward and starting to garner some more information from you. And that project is funded by the North Dakota Specialty Crop Block Grants. Yeah, I talked about some other soil-borne things this morning that I won't get into this afternoon but we're working on projects on Common Scab and several other pathogens as well. So I'd be happy to chat with everybody. I would be happy, I was happy to get samples. Find out what's happening in your fields and what we can do for you, what you're seeing. That information is extremely helpful to us in framing our research going forward. So again, I thank everybody for being here today. I thank the Northern Plains Potato Growers, everybody that put all of their effort into this wonderful field site and can answer any questions that you have. Yeah, so the question is, should you still be concerned about late blight? So it gets cool and it gets wet and you still have a canopy, should you be concerned about late blight? And yes, because you still can get tuber blight. So you're not gonna necessarily get the damage from defoliation of the foliar late blight but as that spoilation occurs on the foliage and it rains and it washes off into the soil and then you can get tuber infection from there. So yeah, absolutely. Like you're not gonna necessarily save the little bit of foliage you have left but you would save the tubers. You know, it's pretty still relatively unlikely I think at this point but we always need it to be vigilant.  Okay, yeah, that's a good point. I did actually, there are some growers having some difficulties with it under irrigation because the heat, so Gary was talking about vine rot. So pectobacterium, diccia, et cetera and in under drier conditions typically wouldn't see that but if you're trying to irrigate to keep that moisture up the heat would really drive that vine rot. So there are some areas that's a decent amount of vine rot from my understanding.


So the Australian Strategic Policy Institute is a think tank based in Canberra, where we produce advice and recommendations and research to the Australian government, but also to partner governments in the region, including South Asia and the Pacific. As we produce the report, which provides guidance to ASEAN member states on how they have been implementing the UN norms of responsible state behavior in the cyber space. This report looks at the practices and policies and other things and activities that we've been able to observe across the region through our workshops, training activities and engagement with think tank partners across the region. So this project was funded by both the UK government and with DFAT cyber and critical tech cooperation program, which provided the funding for us to run activities to cyber norms, in particular the UN cyber norms. Our 11 agreements among all member states of the UN, which describe what states should and should not be doing in cyber space. So it describes what states should do in terms of their cyber security measures, but also in their technical uplift of cyber maturity at home, but also particularly how they interact with one another, engage of tensions, in the case of a conflict, or engage they have certain questions and doubts about what other states are doing. So our work in contributing to the implementation of the UN cyber norms is making the chance of conflict between states in cyber space less likely.


In terms of announcements, I just want to remind you that the final is two weeks from today. At night, kind of late, 8.15, it's two and a half hours long, but we have two and a half hours allocated, which means that if you take the train and go far, life kind of sucks because it's very late. The locations are different, so you should not be in the same place where you took the midterms. Sections, well, the sections for this lecture, plus recitation two. So that's the recitation for the char. Who said A-ton? Yeah, A-ton. Patricio White, not many, yes they shot. Patricio A-ton and Robert are in the Union Auditorium and the other ones are in Earth Space. Okay, also, you should do your course evaluations. You probably got an email saying, please do that. They closed them on the last day of classes, so you need to do them before Monday. It's really useful information for us to know, to have your comments about the course, so I would encourage you to do that. Something like 10 people have done it so far, which is not a big response, so maybe the rest of you will do it sometime this week. I think you have two for this class, one for the recitation and one for the lecture. Yeah? Yeah. Yeah? Well, okay, so what does that mean? It means that everything from the first day has a chance of being on the exam, but slightly more of the problems will be on stuff since the last day. That's the stuff, Taylor series and this differential equation stuff. There will be a few more, slightly, so polar stuff is on the last exam that could still possibly be on the final. So something like, let's say, half of the exam, maybe 40% of the exam, slight tilt towards the differential equations and Taylor series stuff. The other two thirds of the course will also be represented. What are your questions? So, we still have some material to get through, so we should do that. If you remember, we were talking about these predator-prane equations, so I didn't write this name before. So this is Luck and Volterra, and after two people studied this in the early 20th century. Yeah, in the early 20th century, which the model that we're talking about, we have two populations. And even though it's a predator-prane model, these techniques also apply in economics and also, in fact, I'll say towards the end of the class if I get to it also in physics. But the differential equations that we're looking at here, we have two variables. So, let's say we have some rabbits who are written by, say, honor of teeth is their population, and some foxes called f of teeth. Last time they were big O's written with a W, but I got too confused, so they're just foxes. It's easier. And the rabbits have the property that they grow, not K, it's A. Let's call it a little A. In the absence of foxes, their population is a K. I want to call it A. Sorry, I want to call it A. In the absence of foxes, they grow exponentially, and the foxes, in the absence of rabbits, well, they have nothing to eat, so their population will die off exponentially. So again, remember the reason the growth rate is proportional to the amount present, for the foxes, the rate at which they die off is proportional to the amount of foxes they grow. But, of course, the foxes eat the rabbits, so when they encounter a rabbit, then they get to have more foxes, so it shouldn't be, oh well, too bad. So the boost to their population is proportional to the encounters that they have with the rabbits, which is proportional to the product. So when foxes eat rabbits, they get some kind of boost, but, of course, when foxes eat rabbits, it's not nice to eat rabbits, although once in a while they get away. So there are these four constants, A, B, C, and D, and here, in the way this is written, everything's positive, but we'll change it to be not positive soon. And so this is the model, and just the way it's written is just the way you would think of it. They would grow naturally in the absence of foxes, but meeting a fox causes them their population to decrease. And similarly, the foxes would naturally die off in the absence of rabbits, but meeting a rabbit causes them to survive and reproduce. And so notice that here we have two, so we have a system of two differential equations. And in fact, typically, well, not typically, but very often differential equations describe more than one thing. We have systems of equations. And so we want to use some of the ideas that we've already had to, that we've already covered, to understand the system. And one thing that we can see right away, and put it up there, notice that if R is zero, we understand what happens, or if W equals zero, we understand. So we know what happens when the rabbit population is zero. If R equals zero, then the R doesn't change. But you can't read the word to understand. So if R equals zero, we know what happens. So if there's no rabbits, then the rabbit population, well, if there's no rabbits, they don't magically appear, and the fox population grows exponentially. I just see there, or dies off exponentially, because they should call this something like that. So we understand everything that happens if the rabbit population is zero, and similarly, we understand everything that happens, and we know that if there's no foxes, there's always no foxes, and that the rabbits exponentially... So imagine that you put, why do they live exponentially?  Well, so, I mean, that's probably what would happen. There was absolutely nothing from the foxes. The foxes eat each other.  Yeah, sure. So that tells us, we can't really make a picture though we can, but so there's one other situation where we understand here, and if I rewrite this as... If I rewrite this as... r, I can be a-out, a-r times 1 minus b over a f, and if I factor the negative c out here, under plus, so it's minus, isn't it? 1 minus d over c r. So I just factored both sides of the equation, and here we can see one other situation when we know everything that happens. If the ratio of... If the number of foxes is a over b, and the number of rabbits is c over d, so for these numbers c and d, if f equals a over b and r equals c over d, then, well, if f is a over b, then dr dt is zero. So in this case, f of t is always a over b, and r of t is always c over d. So if I'm at this special value where the number of foxes is exactly a over b and the number of rabbits is exactly c over d, nothing changes. So I want to represent that graphically like this. I want to represent this graphically where the number of rabbits is c over d, nothing changes. So I want to represent that graphically like I did at the end of the last class. So here I'm going to make what's called the phase portrait. Also sometimes it's called the phase diagram where I'm going to put the number of rabbits here, and I'm going to put the number... I want to do it a little further over, sorry. I'm going to put the number of rabbits here and the number of foxes here. I'm going to suppress time. So I'm going to think of looking at the ratio of foxes, the relationship between foxes and rabbits. So we know what happens when there's no foxes. If you have no foxes, I mean no rabbits, you stay with no rabbits and the population of the foxes declines. If you have... if you have nothing, no rabbits, no foxes, then you have to wait a very long time for them to spontaneously generate so it just stays with no rabbits, no foxes. If you have a few rabbits, then you get lots more rabbits, and then you get more and more and more.  And now we want to figure out how to analyze what goes on suppose I have a population. Do you want me to use actual numbers here? Last time I got no mostly. Now I'm getting trash. Okay, how many people want me to use actual values for ABC? How many people are happy with ABC? Sorry people with actual numbers. Just imagine a is one, e is two, c is three, so it's like two to one, they want a to c. Sorry. Okay, so let's just imagine now suppose I had... so let's figure c over d just for talking's sake, c is twice d, so this is two. And that a is twice b, so this is two. So suppose I have an equal population of rabbits and foxes, but not too many of either ones. So I'm starting here where both populations are positive, but kind of small. I have 100 rabbits and 100 foxes. Well, yeah. So I'm starting here where I have a small number of rabbits and a small number of foxes. What will happen? Well, we can figure it out by looking at there's going to be some curve here and we don't know whether what will happen is the fox rate will grow and the rabbit rate will both grow or maybe they'll die off or maybe the rabbits will just grow. So it's very unlikely that if we have some, both of them will shrink. So what we want to look at is let's imagine that there's some curve here representing the evolution of f over r, representing the evolution of the ratio of foxes to rabbits. Then what will happen here? Well, we'll have some tangent curve, some tangent line here and the tangent to this by the chain rule. So we imagine that there's some function I don't know, y which is f of t Well, there's some function y of t which depends on y which describes both f and r. What will happen? What will be the tangent here? The chain rule the slope here is going to be the change in f divided by the change in r. So df dr let's just call that df dr at least for a little while the number of foxes is controlled exactly by the number of rabbits then the tangent line is just going to be the ratio of the two slopes here. We can figure out what's going to happen. We can plot a direction field here just by looking at the right-hand side here and the right-hand side here we can see what the slopes are going to be.  Look at this equation here and f is less than a over b so what does that tell us about this? Does anybody have a clue what I'm talking about? Imagine a over b is 2 so I have this equation that equation everything is positive a b c d everything is positive oh yeah that's what I meant oh I see I swapped so suppose that f is less than 2 what do I know about dr dt f is less than 2 and bigger than 0 r is some number what do I know about r and dr dt? yeah well it's not interesting it's positive so r is increasing right so if f is small but positive r is whatever it is then r is increasing right so that says in this case here dr dt is bigger than 0 yeah I'm sorry okay so when f is small they're supposed to be the same so my question is when we're here is df dt positive I mean dr dt is it positive or negative? and when we're here we're in this region f is small and r is small so if f is small this is positive and if r is small well this is positive so that makes it negative so here in this region r prime is positive and f prime is negative what about if we're in this region here where f is still small so f is small so r prime is positive but now r is big so f is small and r is big well if f is small and r is big when f is small this is still negative but now r is big so this becomes negative too so I have negative times positive times negative which gives me positive if we're in this region here so now let's come back to here f is small but I'm sorry r is small but f is big so if r is small then that tells me that df dt is now negative yes f is big which means that this dr dt is still negative and the last case obviously if f is if r is big then f prime is positive and if f is also big then r prime is negative so I was planning to do it here but I guess I'll run this picture here so what is that telling us that's telling us that if we look in this plane which is divided into four bits r prime is in here r prime is positive f prime is negative that means that things are going like that at this point right here is where f prime transitions from negative to positive so it goes straight across and in this region things go up and at this point is where r prime is transitioning from positive to negative so things continue to go up and then they go this way and we get something that looks like that so what is this doing this is describing so if we take a particular solution and we let it run we get something that looks like that this is a depiction of how the fox population varies with the rabbit population so let's look at this now in terms of just what happens to the foxes in terms of time now I'm going to put time here and I'm going to put the number of foxes here if I start today here at this point and I let time run maybe I can do this then the number of foxes decreases then it increases back then it continues to increase then it decreases well ok I ran out of space but we see an oscillation here in the number of foxes as you trace out this curve the ratio of foxes to rabbits goes around this circle this is just the projection of this circle in this way but with the time component so for this initial condition it increases then it increases and increases then it decreases we can do the same thing if I draw it down here I'll just draw it down here if we look at the rabbit population the same business is going to happen except that we're starting here where the rabbits will initially increase right horizontal motion is motion of rabbits is up for rabbits and vertical motion is foxes so here if we start at this same initial condition right there then we initially have some number of rabbits time increases the rabbits increase but then they start to tail off and then they decrease and somehow I'm off a little bit so the minimum of foxes occurs while the rabbits in the middle of the rabbits increasing the maximum of rabbits is the maximum of foxes occurs when the rabbits change so we have something like that so I'm not lining them up very well these peaks are not occurring right I'm sorry we start with the minimum of rabbits here then we go a quarter a quarter of a loop the foxes are at their minimum but the rabbits are somewhere in the middle so that's here then we go another bit more the fox population is now in its middle that's here but the rabbit population has now achieved its max so that's here and then we go another quarter turn the rabbits are in the middle and the foxes have achieved the max and so what we get is a pair like a sign we get a pair of oscillating curves where one is a quarter period behind the other do you see how to transform from this to this used about this you are okay can you voice the confusion so this circle so what is the process here we look at these equations actually you can't we can't solve these equations we can't write a formula for this solution but we can understand how it behaves by looking at some a direction field where we notice that the direction field has zeros there and there and then start applying an analysis about which way things evolve by looking at just what happens to these two things are they positive, are they negative, are they big are they small this gives us a bunch of vectors they go around like that so we can do something just like Euler's method you can put this on a computer and easily apply it but remember this represents I'm not giving you time I'm only giving you the number of foxes the number of rabbits and we can see that if the number of foxes is a little bit smaller than some number and the number of rabbits is a little bit smaller than some other number the rabbits will decrease while the foxes increase right and then if the rabbit population gets even bigger the foxes will begin to increase because it's easy for them to find food but the rabbits will continue to increase but then when there's too many foxes the foxes are very happy when there's a lot of rabbits and a lot of foxes the foxes are very happy but a lot of rabbits get eaten and they get eaten enough that there's not enough rabbits to support the foxes and so then both populations die off that's what this circle is representing the circle is representing the number of rabbits and the number of foxes you should think of this as a movie where we just plot and this point moves around on a circle we have a cyclic pattern of the population it oscillates around something with a green state if we prefer we can just ignore the foxes entirely oops we can just ignore say the rabbits entirely and look at the population of foxes and we see something that looks like all sorts of like a sine curve and if we ignore the foxes entirely and just look at the rabbits we see the population of rabbits does the same kind of thing so now in this particular model with the chosen A, B, C and D you always get these oscillatory patterns but as I said this is not all that we would look at is justice in many applications I mean how many people have done these base coordinates in say physics zero people really okay they use this in physics all the time they also use it in biology and in chemistry and in lots of things you're looking at here we're looking at instead of something that varies with time we're looking at the ratio of two concentrations we can certainly set this up to describe a chemical equation that oscillates where this is the concentration of one chemical and this is the concentration of another chemical you can certainly imagine and if we tweak this thing a little bit suppose that this is not how they evolve instead so suppose that we know that well actually before I do that notice that the signs of these numbers A, B, C and D tell you whether the predator who's the predator and who's the predator when I write down an equation like dx dt is 3x times 1 plus 4xy dy dt is let's make that negative 2, 2 of y times 1 minus 1 half x y we should be able to read off from this who's the predator and who's the predator if we multiply this out oops this supposed to be minus 3 if we multiply this out then we can see these things the x's whatever they are tend to die off in the absence of y's but when y's are around it gives them a boost and the y things are happily are very happy when there's no x's they grow but in the presence of the x's they die so this is the predator so just from the equations we can figure out what, by looking at the sign of how the various states are affected now you can imagine that maybe we want to tweak this a little bit maybe instead of being maybe the predators are not carnivores they're omnivores so they can live just fine without the prey around but but they also eat that so that would change this sign we would still have a predator prey situation but these predators now become omnivores they eat the prey but they also eat the grass so if we change this to a plus we still have a predator prey situation but the behavior is quite different that would reverse the arrows here in the vertical direction so things would behave differently we can also imagine that maybe we have two species that are mutually beneficial what would change if we had two species which evolved which reproduced merrily on their own but in the presence of each other they're mutually beneficial then both of the signs would be net positive also if we have a species on the other then both of the signs would be negative so we have all these variations here another thing that we could throw into the mix is imagine that instead of being growing exponentially they compete for resources so there's limited resources how would we modify this equation so suppose I have a situation where there's two species and there's two species one of them preys on the other so I think aphids and many boats work this way I think they compete for the resources but the lay bones meet with aphids so in this case they both compete for the resources which is like the flowers and so on but the ladybugs eat the aphids so we have limited resources so we want something like how do the aphids grow in the absence of ladybugs there's a limited amount of food for them so what kind of model do we have to describe that so we might use a logistic model here to say that in the absence of anything what letters do we use here I don't even remember k, a 1-a over m so in the absence of any ladybugs we would have something like that just so that I let's call it k1 and m1 so this system has a carrying capacity with a certain number of aphids and in the absence of ladybugs that's how it behaves and similarly the ladybugs in the absence of aphids they can get by oops not b, l they would have some kind of logistic model the ladybugs eat the aphids so they get a boost some other number every time they meet so we would have something like this and similarly these guys would get some they would get eaten so there would be some harm to them so this would give us a different kind of a picture here this would give us something let me just try and draw not go through all the details so of course there's none of anything to get a fixed point here but if we look at the aphid population wants to grow to some certain amount but then it has a carrying capacity here of m1 and similarly the ladybug population wants to grow to some certain amount but then there's a carrying capacity here of m2 and above that they would tend to die off so it's a much more complicated system and if these things are appropriate there's some solution here and we have a much more complicated behavior we might see something like so they would both grow but they're limited and maybe they'll spiral in like that we might see other things too so depending on all of these numbers we might see lots of varieties here so let me just forget about the equations and just think about the setup for a few minutes so suppose that I have a solution in the phase plane that looks like that and let's just call these x's and y's what does this tell me that the graph of y of t looks like so only one person in the room who has a clue so it's going to limit on this value so here to start with a low value of y's they increase and they increase until they reach this height and then they decrease actually until they go rapidly until they get to this height here and then they begin to increase again but they don't increase quite as much they only get this high and then they decrease a little less and then it's a little hard to tell so again imagine we're traversing this and this is telling us what's happening to the height we're ignoring the horizontal component and only looking at the height but thinking of traversing this curve and as we traverse this curve you go up and down then up and down and you go up and down less and less so whatever kind of graph goes on for the x's is a little delay between the bumps now what else have we seen that looks like this it was just about a week ago yeah spring exactly there's no accident that this looks kind of like what we saw in the spring equation in fact this is where you see this in physics all the time if I have a differential equation a second order linear differential equation I can turn it into something like this by a little trick I can say let's suppose that y is the derivative of x there's no x here this is a function of t introduce a new variable x if you imagine that y is representing the position then x is the velocity and if I let y prime be x then this equation the second derivative is the derivative of x the acceleration is the derivative of velocity so if y prime is x then this equation becomes x prime plus bx plus cy equals zero and then I can solve for x prime here of course it's upside down like this so now I have a system of two equations depending on x and y in some sense very similar to what we're doing we're in a praise situation where I have two equations their derivatives depend on their values on their joint values so I have the derivative of x is some function of x and y and the derivative of y is some function of x and y and I can make a phase picture for such a thing and depending on what happens to b and c this exactly tells us whether we see a picture it goes spiraling around spiraling in goes off in two directions so exactly the kind but here we can solve them explicitly so this sort of thing where people make these kinds of how many of you are engineers how many of you are physics how many of you are other stuff let's try to see how many of you expect to take more physics so they do this kind of thing in physics all the time where they make what's called phase portrait let's say for the spring season so if I write down this equation or the spring can I put the velocity here and I put and the kind of spring that we saw it goes down and up like that would have something where so say this is position zero so it would have something where we would see a solution like that and this is describing exactly the motion of the spring the kind of spring that we see there's no friction corresponds to something that just goes around the velocity so when the spring notice that when we have a spring it's going then the position is changing and when it's at the bottom the velocity is zero when it's at the top the velocity is zero so when the position is at its max or it's mid the velocity is zero so it's exactly this kind of situation and also the other situations correspond to different pictures in the phase coordinate so this stuff with the phase coordinates of the second order equations is not an exam there's no homework on it but if you do more physics you will see it for sure okay so one more announcement there's going to be one additional web assign homework there will be another one due after the class ends it's about five or six problems it's on this predator prey stuff and the remaining classes I'm just going to start with you covered all the material