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Nathan Hunt: This is the Essential Podcast from S&P Global. My name is Nathan Hunt.

Recently, I found myself interviewing a number of different academics, investors and entrepreneurs on the topic of innovation. All of them have referenced the same intellectual authority. William H. Janeway has been called a theorist-practitioner by no less an authority than the economist Hyman Minsky.

In his role as practitioner, Bill Janeway has been an active venture capital investor for more than 40 years. His successes in Silicon Valley are the stuff of legend. Well, as a theorist, Janeway received a PhD in Economics from Cambridge University. His book, Doing Capitalism in the Innovation Economy, is considered by many to be the definitive work on innovation. Currently, he serves as a visiting scholar in the economics faculty of Cambridge University.

I am delighted to welcome Bill Janeway to the podcast. Bill, welcome.

William H. Janeway: Good to be with you, Nathan.

Nathan Hunt: Bill, I have known many investment bankers and venture capitalists over the course of my life. Yet, I believe few of them would refer to a particularly successful investment as their apotheosis. Do you see yourself as different from the general run of technology investors? And if so, how?

William H. Janeway: Well, the oldest line in marketing is don't be better be different. And certainly, there are a number going back to the great Arthur Rock and even before to AR&D, there have been investors in advance computing-related technology of enormous success. So I don't want to try to put myself up against them.

If I brought one thing that was somewhat different to the party, going back to the late 1970s, it was a lot of what I had actually learned at the University of Cambridge. I wrote my PhD thesis on 1929 to '31. And I'd seen the manner in which financial markets could, on the one hand, deliver capital at extraordinarily favorable terms to such innovating companies as Radio Corporation of America, in the late 1920s, but then turn off the tap and bubbles could burst.

But it was also clear in the late '70s and early '80s that there was something going on in the world of computing that I really found profoundly exciting and an extraordinary once-in-a-generation, if not once-in-a-lifetime, opportunity. And that was the architectural transformation of computing from centralized, proprietary vertical stacks of technology dominated by IBM, but with such other major companies as Digital Equipment and Hewlett Packard, into the increasingly open, increasingly distributed network world that began in the early 1980s when the PC became standard and networks to link them to specialized servers began to emerge through the Internet.

And for some 20-plus years, I really dedicated myself to investing in that transformation every way I could. First, from a small, limited base at a firm called F. Eberstadt and then from the late 1980s at Warburg Pincus, where the resources to play strategically were fully available. And that's what my, if you like, differentiation was with very much a focus on this transformation of computing architecture networks and then solutions built on top of them.

Nathan Hunt: As I said in my introduction, you have written a book which has become a classic, Doing Capitalism in The Innovation Economy. One of the notions in that book that is central to your point, I believe, is the notion of the 3-player game. Who are the players and what is the game?

William H. Janeway: Well, the game is when I learned, going from the early 1970s through the 1980s, that was, okay, we've got this advanced technology, where does it come from? Who pays for it? How does it get financed?

It's not just a miracle that occurs between an entrepreneur and a venture capitalist. Upstream, there's the investment in science, in technological invention before anyone can know what the return on that investment is going to be. And then when we look back through history, we can see that the technologies that have really mattered, railroads, electrification and now, looking back from today, the Internet. By way of automobiles and highways, we can see that these transformational technologies have been deployed as networks that enable entirely new markets, really a new economy, to emerge through trial and error and error. Now all of this process takes place under conditions of uncertainty.

So we can see again and again and very definitely in the post-World War II United States, the role of the state. That's the first player in the game, the role of the state funding the upstream science increasingly, taking that over from the big monopoly companies like IBM and AT&T and General Electric and Xerox, taking over from them as a matter of a national mission, which of course was legitimized by the cold war for a long generation. That's the first player.

The second player has been present in every wave of new technology over the last 250 years. And that is financial speculation, the financial market. When it appears that the possibility of a new economy emerging from the deployment of innovative technology, then comes the bubble, then comes the wave of investing, the manias.

In the first half of the 19th century, it was called Railway Mania. In the 1920s, when the electricity grids were built out and generating power increased by orders of magnitude, it was the great Bull Market, the Roaring Twenties. And then, of course, against that background, understanding that what we experienced in the late 1990s was another one of these waves of speculation, building on technology that had been supported and sponsored by the state. That was the secret to, a, leveraging the availability of that capital, and then recognizing that investors and bubbles come in 2 categories, the quick and the dead. If you stick around believing that this is the way it's always going to be, that this time it's different, you'll be one of the dead.

But then finally, the third player, the market economy, the world in which people buy and spend, work and save. That market economy is what again and again has been transformed by the deployment -- the development and deployment of these radical innovative technologies. So we go from the first wave of technology usually backed in one way or another by state, by an investor who doesn't care about financial return, who can be an early customer for whether it's guns made with interchangeable parts at the American armories in the 1820s and '30s. That developed the manufacturing technology that became sewing machines and bicycles and eventually automobiles. The state played a critical role then. Each time one of these new technologies became commercially available, financial speculators rolled in and promoted and funded the fast acceleration and expansion of the economic impact. And then finally, the market economy was transformed as it was by railroads, by highways, by electrification and by the Internet. That's the 3-player game.

Nathan Hunt: Bill, I think it's important to set up for our listeners that there is a long-standing disagreement in economics, which is between the Keynesian school epitomized by your own Cambridge University and the Neoclassical school, which was sort of centered around the University of Chicago. You definitely fall within the Keynesian side of that. And that relates to my next question which is, as I was reading through your book, I noticed what I thought was a common theme between your criticism of the mark-to-market approach to valuing assets and your criticisms of the efficient market hypothesis and the rational expectations hypothesis, namely that both seem to take asset pricing as some sort of platonic form, like there is a true foundational asset price. I'm curious if you would agree that this is a common problem and, if so, how you believe assets should be valued.

William H. Janeway: Well, first of all, I don't want to complicate both of our lives by going into details of what happened to Cambridge's version of Keynes' economics, which in turn was transformed in the New Cambridge where MIT and the great Paul Samuelson and Bob Solow did transform Keynes' economics. And then that was what Chicago really grew up in opposition to. And that's a matter of macroeconomic policy.

But deep, deep down, there was one lesson from Keynes that relates directly to your question, how do assets get valued? Now in conventional finance theory, we can define a fundamental value of any asset by discounting back to today's date the expected net cash flows that accrue to ownership of that assets. Now my argument with that is only that, and this is a Keynesian argument -- an argument of Keynes, I want to be clear, not necessarily Keynesian, an argument of Keynes. The future is not just uncertain, not just risky, but the further out we get, the more unknowable in principle it becomes. We are ignorant. As Keynes said, we just don't know what the price of copper is going to be in 30 years. And you're trying to value a copper mine based on the net present value of the cash flows from that mine.

At a certain point, you're just randomly guessing or kidding yourself.

So that's one line of argument that I hold to strongly and that we should be skeptical about the attempt to define the fundamental value of any asset, particularly a financial asset. And when we look at the history of the stock market in the 20th century, it turns out that stock prices have been on the order of 6x more volatile than the underlying cash flows of the companies whose shares are being valued in the market. And that, as modern finance theory and the rise of derivatives and high-frequency trading and hedge funds emerge in the last 40 years, the volatility of the market went from being 3x more than the cash flow to being 10x more than cash flow.

So that's a kind of validation that Keynes' insight was correct. Now Keynes had an answer to that. And it's the -- one of the central passages of the great Chapter 12 of his general theory, the Chapter 12 on expectations in which he likens the process in the market of shares being valued, being priced in the market to a kind of newspaper competition for the readers that was quite popular in Britain, in London in the 1930s. It was a beauty contest, but it was a contest not to choose which was the most beautiful of the faces of the girls that the readers were presented with -- and yes, this was that world. This was misogynistic, if you like, sexist. But the challenge was not to pick who you think is the most pretty. It's to pick who you think average opinion will think is the most pretty.

So you're trying to guess what the crowd will center on in balance as the equivalent of deciding where the price of the security is going to go as to whether it becomes a meme stock. It becomes a super-hot growth stock or it becomes a company that is despised and forgotten and lost. It's an exercise in collective behavior where coordination is very, very fragile, where equilibrium is not only at best transient as opinions change about what other people's opinions will be.

That, I think, is a very central understanding of how the financial markets work, which relate back to how real assets get valued. The market in existing assets prices new assets, I think this has now actually become broadly agreed across the discipline. Those in Chicago like Gene Fama, the great professor Gene Fama, who adheres still, despite everything, despite the global financial crisis, despite the great bubble of the late 1990s, despite the current extraordinary, and I will assert, unsustainable valuation in 2020, 2021 of growth stocks of tech stocks. Despite all that, there are a few like Gene Fama who still adhere to the core that fundamental value will assert itself, does assert itself and, therefore, the market is efficient. That's become a minority view. And I think that Keynes' insights on this front, in fact, have become the dominant understanding of economists and finance specialists, both in academia and in the investment world.

Nathan Hunt: Bill, last week, technology stocks took a bit of a hit. Prominent investors in technology companies like Cathie Wood are back in the headlines for all the wrong reasons. I'm wondering as a professional investor, do you see this as just the normal froth of the market? Or is this a forward view into the post pandemic economy? Or are investors, in fact, recalculating the net present value of revenues based on the inflation numbers we're seeing?

William H. Janeway: Well, Nathan, the first thing is to recognize that since 2008, with a couple of exceptions, brief exceptions early on, we -- the world has been living in an unprecedented financial regime. This is the first time in history when we have had a decade's worth of negative real risk-free rates of interest sponsored by central banks, who became, as my friend Mohamed El-Erian put it, the only game in town supporting economic recovery and growth when the world took its tragic turn towards austerity in 2010 as the Great Recession was very, very slowly bottoming out.

So we've lived in a regime where if you want to get a positive real return, you have to reach for risk. Now this has transformed in the last 3 years the venture capital world as nontraditional investors. That's what the National Venture Capital Association calls them, mutual funds, hedge funds, sovereign wealth funds, family offices. Investors who are used to investing in liquid trading public markets have poured capital into late-stage venture buying illiquidity, buying at enormously inflated prices, shares that they cannot legally sell. That's, of course, a great sign that we have been in a bubble.

But that regime has depended on the perception that the central banks of the world remain committed to do as Mario Draghi said in -- at the ECB, whatever it takes to promote economic recovery. Well, economic recovery has finally asserted itself. And indeed, we have signs of inflation. Some of it is clearly, in fact, transitory and the result of supply chain breakdowns under the impact of the pandemic. Some of it does appear to reflect increased final demand for goods and services. And the central banks, particularly in the U.S. and the U.K. have begun to emerge from that extraordinary regime, of negative real rates and, in some cases, even negative nominal rates.

Now markets move on expectations. The dominant concern in the markets appears to be not -- I mean, if anything, increased inflation would suggest increased earnings, nominal earnings from companies, but it's really the discount rate at which those future earnings, future revenues will be evaluated at, the discount rate to bring those expected or hoped for or imagined future revenues and cash flows back to the present day. That's what's under question. And an increase in the discount rate has an exponential impact on the net present value.

I was just looking at a chart that -- a very thoughtful venture capitalist at [ Redpoint ], [ Ted Hungies ] put out last week, which showed that the multiple of revenues applied to the top 75th percentile of software companies, public software companies has declined by more than 50% since the peak in 2021. That's the correction of a bubble.

By the way, it still declined all the way down to 15x future revenues, not cash flow, not earnings, future revenues, which is still an extraordinary valuation even for a high-quality growth stock with an enormous market to address. So I don't think that we have seen a full correction for the excesses. But I would leave you with the thought that by my count, this has actually been the first financial bubble that we've seen, which was directly sponsored, even if not for the sole purpose of it, by the central banks of the world. This is very different from the monetary policy regime of the late 1990s.

Nathan Hunt: Speaking of bubbles, I found your discussion of both the banality and necessity of asset bubbles fascinating. What makes for a "good" asset bubble or what you call a productive bubble?

William H. Janeway: So I think of the space of bubbles, if you like, in terms of a 2-dimensional graph. Just imagine, you have a piece of paper in front of you. And along the bottom, you have a line that runs from no leverage to a lot of leverage, from the public equity markets where leverage is limited to the banking system where leverage is a function of the ratio of assets to reserves. Today, order of magnitude, 20-plus times. In 2007, it was more like 50 plus even above that because of what was allowed to be counted as equity and reserves under a very, very loose regime. So you have that along the bottom. The locus of the speculation, is it taking place in the relatively unlevered stock market? Or is it taking place in the highly leveraged banking system and the new shadow banking system next door to it?

And then on the vertical axis, think of the assets that are the focus of speculation. Are they -- houses existing property? Or is it some sort of novel new technology which, deployed at scale, will enormously increase the production possibilities of the economy, such as railroads, electrification, the Internet.

So you can locate on that graph. Each bubble that we've experienced. And the obvious comparison is between 1996 to 2000, where the speculation was overwhelmingly in the equity market and the assets that were the subject of speculation were the shares of the companies that were building the physical Internet, the World Comms and Global Crossings. And the companies that were on top of that, building the capacity to turn the Internet from a medium for information and communication to a medium for commerce, which included my companies, Veritas and BEA Systems and a lot of others as well. So that bubble, the speculation went radically to accelerate the build-out of the Internet and its transformation into an environment for commerce. That was a productive bubble.

Whereas 2004, 2007, the speculation was taking place in the banking and shadow banking systems and the focus was on houses. And you can build as many new, I'd like to call them oceanside houses, in the Nevada desert as you want, and it will not increase the production capability of the American economy.

So that was an extreme example of an unproductive bubble where, given the amount of leverage involved, when that bubble burst, the results were economically and financially catastrophic. When the dot-com bubble burst, we had a mild recession, nothing out of the ordinary because the leverage was much less. So what matters in categorizing bubbles is what is the focus of speculation and what is the locus of speculation, in particular, how much of that speculation is funded by borrowed money versus cash equity.

Nathan Hunt: I'm intrigued by a term financialization that is used by both you and Danny Breznitz of the University of Toronto in his book on innovation. You both seem to use it with a negative connotation. Can you tell me what you mean by financialization and whether you view it as a good thing or a bad thing?

William H. Janeway: Well, up to a point, financialization is essential to the development of a modern economy, financialization, meaning that real assets, whether they are computers or houses -- but that real assets can be valued and traded and have securities written against them, which can be valued and traded and thereby mobilizing financial capital for real investment.

So I would never say that financialization as a phenomenon is inevitably wrong. On the contrary, it begins by being necessary and then it becomes excessive. So for example, if you take a simple chart of the total value of the shares traded on NASDAQ and the New York Stock Exchange as a ratio to GDP, to the added value of the American economy, we saw the most phenomenal increase in that ratio between roughly first 1950 and 1980 and then 1980 and 2007, increased by decimal orders of magnitude.

We saw the same thing in the balance sheets of financial institutions, particularly investment banks relative to the corporations of the private sector, that they were supposed to exist in order to support by providing financial services. The balance sheets of the commercial banks -- I remember this from the work of the great economist, Hyun Shin, Chief Economist of the Bank for International Settlements, the balance sheets of Corporate America rose over 30 years by a factor of 10. The balance sheets of the commercial banks, the banks where you have your deposits and that make loans to businesses for working capital, rose by 10x as well. The balance sheets of the investment banks, Morgan Stanley, Goldman Sachs, Bear Stearns, Lehman Brothers, the last 2 no longer exist, of course, they rose by 100x. That's excessive financialization.

Nathan Hunt: You've noted in a recent article that the great depression could not have started a century earlier because, "only in an economy with so much of its wealth denominated in money could a crash have such collapsing economic effects." Do you foresee a parallel danger in further financialization?

William H. Janeway: Well, the other factor to bear in mind about the Great Depression was that we've had a -- since then, and particularly by way of World War II and the rise of what is sometimes referred to as the warfare state, and then from social security through Medicare and on to Obamacare, the rise of a limited, constricted by the rest of the world standards, but nonetheless real welfare state, the public sector in the United States has grown between -- in 1929 when the total public sector was 7% of the national economy and the federal government was only 2%.

The state and local was more than twice as big in aggregate, twice as big as the federal government. Today, the total public sector in the U.S., depending on how you count, what you include, but including the transfer payments, is more like 35%. What that meant was that when the great crash happened and the banking system was allowed to tilt over into liquidation, the public sector, the federal government was not remotely large enough to offset and counteract the contraction on profits, investment, employment, consumption that led to a 50% decline in nominal GDP in the course of 4 years.

The federal government indeed grew from 2% to 4% of the economy under Herbert Hoover, but that was because the economy declined by 50%. Only with the new deal was there some somewhat haphazard, on-and-off push to expand appropriately the public sector. And then, of course, with World War II and then the post-war growth of the social benefits, we now have a public sector which demonstrated in 2008 and '09 that it was big enough to counteract a financial crisis which had all of the earmarks of being capable of matching the economic destruction of 1929 to '33, of the Great Depression if the public sector had refused to act either through the Federal Reserve or through Congress and the presidency to offset the impact of the financial crisis.

Nathan Hunt: Let's revisit the 3-player game necessary for an innovation economy. When you look at China today, how do you think they are playing the game? And has your opinion changed since you wrote the conclusion of the revised edition?

William H. Janeway: I have to say, the Chinese, like every follower nation beginning with Britain in the 17th century and then the United States in the 19th century and then Japan, Korea and China in the 20th century, China has indeed appropriated everything it could get its hands on just as the U.S. did, just as Germany and Japan and Korea did. But what -- the most valuable thing they've appropriated in my opinion has not been the intellectual property of specific technologies. It's been the model of state-sponsored investment and deployment of innovative technology.

They have demonstrated in the course of a generation from roughly 1990 to 2010 that they know how to play that game. They have done so with some risk on excessive leveraging of the unproductive real estate economy, which they're clearly now having to grapple with. But at the same time, over the last 3 or 4 years, in responding to the clear challenge that China represents, they now have an enormous incentive to invest in reducing their dependence on Western and explicitly American science and technology.

So I would expect to see, and I think we are seeing signs of this now, increased upstream investment in science, increased investment in reducing dependence on, for example, semiconductor design technology from the West, not just the U.S. but from Europe as well, semiconductor production technology particularly from Europe, not from the U.S., and that facing the U.S., which has spent 30, 40 years, pursuing -- well, let's say, abandoning any sense of national strategy around development and deployment of technology.

We have seen effectively the liquidation of the high-technology manufacturing base of the United States. And we encouraged it. We encouraged our business to value efficiency, lowest cost over resilience. We saw part of the -- of that play out and the impact of the pandemic with these long fragile, vulnerable supply chains. But it also goes with the inability right now for the United States to manufacture, not just semiconductor chips at the extremes that TSMC in Taiwan, which is losing lots of engineers to Mainland China. Intel is clearly far behind TSMC at the critical frontier is proposing to invest massively. But U.S. funding of upstream science as a share of GDP has been declining for 40 or 50 years now. And there doesn't seem to be much sign of a reversal there.

I would be -- I think that there is a growing -- and this is one of the few areas where there may actually be a bipartisan agreement on technology strategy towards increased commitment of public funded.

But you know, Nathan, there's a bigger story here. And it's one I talk about in my book, I talk about it in my lectures all the time. And that goes back to an effect of -- a generalization of what you were asking about when we were talking about efficient markets. For Neoclassical economics, efficiency is the virtue. It is the sole virtue, efficiency and the allocation of resources such that waste is minimized.

Now at the technological frontier, waste is inevitable if you're going to succeed in pushing that frontier out because success comes from trial and error and error and error. If you're not prepared and capable of absorbing projects that don't work, you are never going to succeed in leading innovation. And similarly, the focus, as I just said, on efficiency in the supply chain eliminates the inventories that will carry you through when some break takes place in that long fragile chain of connections that represents modern global manufacturing.

This was all a function of the enormous increase enabled by information technology in globalization that began roughly in the 1980s. So coming back from that and seeing China recognize, I take seriously the notion that China has really learned from how we did it after World War II and is determined to do it themselves.

That challenge is real, and I wouldn't change at all what I wrote at the end of my book as you refer to it. What I wrote there was that we may be facing the first change in leadership at the frontier of the innovation economy since the United States took over from Britain at the end of the 19th century and beat Germany who in 1900, was poised to be the scientific leader before it entered on the worst generation that any developed nation has had to experience in the last 300 years from 1914 to 1945.

Nathan Hunt: I want to dig into this concept of waste. In the coda at the end of your book, you distinguish between bad Keynesian waste and good Schumpeterian waste. Do you feel the Chinese approach to the 3-player game is capable of tolerating the latter?

William H. Janeway: That's a very good question. Now by Keynesian waste, I mean, unused resources under conditions of, not even necessarily depression, but recession scale, unemployment, unemployment of people, unemployed machines. Machines rust, people forget their skills. That's the unnecessary "Keynesian waste." The Schumpeterian waste is the necessary waste of trying and failing and trying again and failing better and finally succeeding, success by trial and error and error and error. It's going to be interesting.

Now, 2 great scholars, Daron Acemoglu and Jim Robinson, have written a book, a very well-known and highly regarded book called, Why Nations Fail, which suggests that the secret of success at the frontier is indeed Schumpeterian created destruction. That created destruction depends on what they call economic inclusion that new players, new entrepreneurs can succeed and be accepted and become part of the environment, part of the environment of innovation and growth driving the economy and that, in turn -- and this is a critical step, that economic inclusion depends on political inclusion.

And here, they cite the opening up of the British political system during the 19th century and the American relatively open -- highly open political system in the 20th century. They don't spend much time thinking about how in the 19th century, the last half of the 19th century, Germany became unquestionably the scientific leader of the world and the source of the first genuinely science-based industry, the chemical industry and at least equal to the United States in the other great science-based industry, electrical engineering.

Prussia was not a politically open society, but it was economically open. So China is clearly not a politically open society, but it has been economically open to an extent.

Now I am not a world expert on what is going on in China. I read a lot. We all read a lot about what's going on in China. I do take seriously one view which is that the political assertion, a quite brutal intervention in the market economy that, for example, has closed down the for-profit tutoring industry -- just closed it down and which has had a real impact on social media far beyond what I think is facing Facebook and its noncompetitors, but Facebook and Alphabet in particular. But it goes with a clear attempt to move entrepreneurial energy and risk investing towards the kind of hard core innovation of semiconductors and relevant software where the U.S. had been the world leader and, certainly in the case of semiconductors, no longer is.

So I would say I have an open view. But I don't think that the -- purely -- the linear model that Acemoglu and Robinson lay out is necessary either historically accurate nor controlling of China's future.

I'd just add, by the way, that at the time when Britain was becoming the first industrial nation, was leading the world into high-scale textile production and steel production in the 19th century, the British political system was not only closed, it was incredibly corrupt before the reforms that began with the Great Reform Act of 1834 and the repeal of the Corn Laws in 1846. So I do think that Acemoglu and Robinson is less than fully accurate history and not necessarily the best guide to understanding where China is going from here.

Nathan Hunt: Bill, it is my great regret that we are fast running out of time, but I would like to ask you one final question. We've been enjoying this delightful global pandemic for more than 2 years now. It has, at times, seemed like a new Keynesian consensus was driving government actions. But now it seems like we're creeping back to austerity. Given inflation, is stimulus played out or are we repeating the mistakes of the great financial crisis and the great depression in pulling back too soon?

William H. Janeway: That's a very, very good question. And like all good questions, of course, it reaches forward into that future, which as Keynes said, we're truly ignorant of. I guess, I think you have to break it down somewhat.

So first of all, there is, in the U.S., a distinctive third vector orthogonal to a discussion of the impact of the pandemic and economic fiscal responses there, too. And that, of course, is the political paralysis in Washington and in many of our state governments as well. Clearly, there was an emerging consensus, which one can see exists in the polls of the public with respect to this being a time for long-term investment, both in physical infrastructure for which a substantial commitment was made last year, but also to investment in human infrastructure in pre-K education, in education more broadly, community colleges, in skill building, for people to play a productive role in an economy that's increasingly digitalized.

That has been frozen in place, even while, including in the great state of West Virginia, the polls show overwhelming public support for that kind of investment. And of course, there are many issues around this, but as a matter of macroeconomics, even a $2 trillion headline number on an investment program spread over 10 years, actually amounts to barely 1% of American GDP.

That kind of investment would not have driven the economy into a spiral of hyperinflation. I think that we are seeing that the policy paralysis I don't worry about as much as an impact today on the continued recovery and the viability of the macro economy.

I worry about what we're not investing in for the long term capacity of the American economy and other western economies, particularly British economy, which I know a lot about, to see them increase their long-term productive capacity. And that goes with what I hope we will see, which is a substantial increase in federal funding of science on a very broad basis, which has been lagging. At the same time, as under all those pressures, for efficiency in the private sector, we've seen the research and development spending in the private sector move overwhelmingly away from fundamental research and towards short-term product development.

And we did have -- and this is what's frustrating. We did just have an extraordinary exercise, a case study in how the 3-player game played productively can have such an enormous impact. It's called vaccine development. First, it was the upstream science sponsored by the National Institute of Health, augmented by, as it happens, the Department of Defense as well and then the advanced purchase agreements, which everyone who touched them should get credit for, providing a certain market for the risk investments by Pfizer, BioNTech and Moderna.

No one could have imagined -- no one did imagine in 2020 that in less than 2 years, we would have billions of shots of an effective vaccine available from the lab to your arm. That was an extraordinary achievement and it demonstrates -- and by the way, some cheap capital came along to fund BioNTech and Moderna as well. So speculators got to play their role in this little exercise in the 3-player game. I think we should take that and really use that as a reference point in thinking about public policy going forward.

Nathan Hunt: Dr. William H. Janeway, thank you so much for appearing on the podcast. It has been a pure pleasure to talk to you today.

William H. Janeway: Thank you so much, Nathan. Great questions, great opportunity.

Nathan Hunt: The Essential Podcast is produced by Kurt Burger with assistance from Kyle May and Camille McManus. At S&P Global, we accelerate progress in the world by providing intelligence that is essential for companies, governments, and individuals to make decisions with conviction. From the majestic heights of 55 Water Street in Manhattan, I am Nathan Hunt. Thank you for listening.