The University as Idea Factory

Today, intellectual property comprises an estimated 90 percent of the value of the Fortune 500. Take a moment and let that sink in. For the world’s biggest and most successful companies, tangible things like land, equipment, mineral holdings, buildings, vehicles and inventory provide only 10 percent of their value. The rest of their worth, the overwhelming majority, comes from ideas. Those legally protected ideas, collectively, are worth over $40 trillion. This represents a massive change from the past. In 1975, by comparison, IP provided only 17 percent, not 90 percent, of corporate value.

This seemingly arcane fact is never discussed in higher education. I have never heard it mentioned at a higher education conference, never seen it referenced in our major higher education journals. But we need to discuss it now, for this fact should dominate our thoughts about the present and future of higher ed.

The fact that intellectual property is source of the overwhelming majority of wealth matters to higher education because we are idea factories. In a world where ideas are the only valuable currency, we are the mint. This is, in part, because of the economic importance of university research. In biotechnology, for example, 15 percent of patents are directly linked to university research—one reason why MIT’s Kendall Square has more technology start-ups than coffee shops.

But our real impact, no surprise, comes not through research, but through education itself. We train thinkers and those thinkers go on to create virtually all the value in the contemporary economy. The media likes to celebrate entrepreneurs like Bill Gates, who dropped out of Harvard, and Elon Musk—an Ivy League college graduate, of course—who claims that college is unnecessary. But that claim belies reality. Today, 90 percent of patents are filed by college graduates, and 75 percent of all high-value patents are created by persons holding university graduate degrees. Colleges and universities are the single greatest incubators of wealth in the world. Without us, the modern economy could not possibly operate, let alone thrive. We make the economy go. We are the foundation of American commercial success.

The centrality of higher education to the production of ideas has important implications for our current self-understanding and our marketing. When people say college is “no longer necessary,” we should say in response, “Without us, the entire ideas-based economy would collapse.” When people ask whether college is valuable, we should reply, “Our graduates create most of the wealth in the world.” When people say that universities have lost their way, we should reply, “The market says otherwise.”

I believe the value of higher education transcends market value. I believe education is ultimately about ethical and political value formation and thus about being wise. But for those who insist we justify ourselves in market terms, the proof is there in U.S. corporate earnings reports.

Our role as wealth creators has massive ramifications for higher education policy. First, it demonstrates the societal importance of investing in university research. American wealth is built upon the foundation of university training. Ideas drive economic growth. Without government investment in basic research and in university labs, the pipeline of wealth creators will dry up. The only way America can continue to lead the way in wealth creation is if it funds enough labs, research and arts and science courses to train the thinkers who will drive the economy of the future.

Second, the importance of ideas to the economy highlights the importance of artificial intelligence to the university and to college education. In the near future, the most valuable ideas will not be developed by humans alone, but by humans harnessing the power of AI. Right now, very few people understand how to apply AI to fundamental problems and intellectual challenges. If we want colleges and universities to thrive, we must ensure that they become the single most important place where thinkers and students learn to use this powerful resource. We cannot bury our head in the sand. We must make AI our friend or perish.

Finally, we must do a better job identifying the precise types of educational interventions that form critical, creative, fruitful minds. We cannot simply assert that our traditional form of education produces the best thinkers. We have to prove it.

As a personal matter, I love education because I love ideas. For me, curiosity has always been my driving force in life. That is what makes education precious to me. But not everybody feels that way. For some, education seems like a costly burden. In a world of limited resources, where government funding is core to our business model, we must justify our existence to these skeptics. Reminding them that ideas are all that matters in the global economy is the right place to start.