Research Money

Corporate or Academic?

The University Industrial Complex is sweating. They are about to lose millions of dollars of funding from the Federal government. Many have pulled useless DEI programs, but given the bent of the colleges these days, it is still there, just in the back office instead of front and center on a website.

Columbia University is a hotbed of anti-semitism. It always amazes me that in one of the most heavily populated Jewish cities, there is a ton of anti-semitism. Plus, it’s tolerated! Trump is pulling $400MM in grants from Columbia, but other universities are also on the docket to get funding pulled.

The far left-wing will cry fascism. “Trump is trying to influence speech.” Of course, they ignored the fact that a lot of research at colleges and universities across the country was politicized before Trump.

Is it the right thing for government to be funding research?

It’s a worthy question with no great answers. Certainly, there are some basic research ideas that the general public might benefit from with government-funded research. But, when every environmental one ends up with the conclusion that climate change is affecting it more than anything else, that’s not good basic research. The NIH indirectly funded research that led to Covid. The NIH has funded heavily politicized research which funds the aims and goals of cronies, not altruistic basic research that will help taxpaying Americans. Other agencies are similar.

Should corporations be the sole place where research is executed? Corporates will put dollars into projects that they think they will get a return on investment. I don’t think this is necessarily a bad thing. However, because the corporates need a return, a lot of things that need to be researched will be ignored.

Here is an example. A lot of medical research goes after various cancers. Why? It’s not just because it is a deadly disease and we want to stop it. It’s because it is a huge market. A lot of people get cancer.

Cystic fibrosis is a deadly disease. Horrible to live with. I have had friends whose wives or family have died from it. But, there is not a lot of money that goes to finding a cure for cystic fibrosis. The market size isn’t big enough. Not enough people get it. Corporations aren’t going to invest a lot of dollars to figure out a cure because there is no money in it. Startups aren’t going to try and figure out a cure because there are plenty of other diseases with huge markets they can go after and find a cure for, which also gives an economic incentive to the founders.

Another way to accomplish basic research is through a non-profit foundation dedicated to a cause. In my opinion, this is a great way to research a problem as long as the foundation doesn’t take a dollar of taxpayer money. That keeps the foundation independent and beholden to donors, not apparatchiks. There is little difference in incentives between the US bureaucrat or the old Soviet kommisar. Independent ideological investors or donors tackling research on a problem is fantastic because the economic incentives align and so do the opportunity costs. Even if I am just donating, I receive the economic incentive that I am putting money into something that makes me feel good.

If you aren’t familiar with the path a medical startup takes to get to market, I will generalize. It is a regulatory thicket. For sure, it should be a bit arduous. We are messing with human life, not a piece of software. But, it’s pretty expensive. I am invested in Delphian Therapeutics. I invested because a close friend of mine, whom I trust, is heavily involved. It is the only medical startup check I have ever written and I am not writing anymore. Don’t send me medical deals to look at or any startup deals because I am not writing checks anymore.

Here is the SBIR they had to file with NIH to receive money. They also raised money from private investors. Without the NIH grant, it would be too expensive for them to do a Stage 1 trial. If they get through Stage 1, they go to Stage 2. The trial has to be set up and paid for. That means more government grant applications and hope you receive it along with more fundraising from the private sector. Of course, if they get through Stage 1 it will be easier to raise from the private sector since the product has been de-risked and people think there is a likelihood of payoff. Get through Stage 2, it will be easy to raise money for Stage 3. They won’t need government money. Get through Stage 3 and it is “Katy bar the door” on valuation. FDA approval will come shortly and they can go to market. However, the process takes years.

The broader point is no drug gets to market in America without government money. Other countries of the world, like Canada, surf behind the American government funded research and integrate the successful drugs into their socialized medical system, trying to have a free lunch.

Senator Rand Paul does a “Festivus” yearly on X. He is a medical doctor. He cites all the wasteful spending that goes on each year. It’s billions of dollars. Billions. It’s taxpayer dollars and we are in a situation where we just cannot afford to waste billions of dollars anymore. America is on a financially unsustainable path.

We are long past the “let’s use a scalpel and right size government”. We are at the “let’s use a chainsaw and talk about what we need in government”. So, break it all apart. Burn it down and rebuild it.

That means all the people that talk about budget cutting and lowering government spending, balancing the budget actually have to execute on it. I like to say “It is fashionable to quote Milton Friedman until you are confronted with acting like Milton Friedman.” Talk is cheap.

Friedman would cut every single government department except for Defense, Justice, State, and smatterings of others. You could call him Chainsaw Milton. He’s not wrong. My friend Jeff Minch talked about cutting the size of the VA here. He has some excellent data on why it should happen. We do not need a national Department of Education. Education in America stinks compared to how it was 30 years ago. The DoE is just a union candy store. The Department of Energy is useless. We could go on and on.

Despite Trump’s initial salvos during the first two months of this Presidency, Congress hasn’t moved. The continuing resolution they passed didn’t cut anything.

With the advent of technology, we can automate much of government. We don’t need as many people. We can decentralize it. We can outsource it to states. States ought to be decentralizing and outsourcing to cities.

Change is pretty difficult for most people. I read David Friedberg’s X post on Social Security. The pushback in the comments is something! That’s mostly a Silicon Valley crowd and Silicon Valley is the cradle of innovation in the world. They specialize in change and breaking things. Hence, you can see the mountain that has to be summited because the alternative is much, much worse.

The interesting thing is the less the government directs and does, the more degrees of freedom individuals have to make choices.

Government cannot solve every problem we have. Too many people look to government to solve things or provide money to them. All those things that are getting cut now, via the end of USAID, are examples. If you ran a business because you got money from the government, you didn’t run a business. You ran a charity. If you are running a charity, you need to get money from donors, not taxpayers.

Here is an example. I do not one cent of my taxpayer money going to Pro-Life organizations. I also don’t want one cent of my taxpayer dollars going to Planned Parenthood or similar organizations. However, if someone wants to set up a charity to accomplish the goals of either organization, I am all for it.

Yet, if Planned Parenthood funding is cut, the majority will be accused of killing women who wanted to kill their baby.

In the short run, I am willing to experiment. Get the government out of research and let the private sector do it. See what happens. Let universities compete for research dollars from companies, not the government. Let universities compete for research dollars from donors, not the government.

Competition is good. Independence from government is good.