Does Academia Have a Bias Towards Government Spending?

Kevin McKernan believes there are too many scientists paid from tax money, and that the free market would have handled the Coronavirus crisis much more precisely if the government had not intervened. His controversial ideas are explained with detail and a level of understanding that is simply amazing. I felt genuinely uncomfortable as he approached topics that are controversial, but his nuance made the conversation particularly compelling and interesting. View the full interview here.

KM: There is a there is a bias in academia, I was involved in on the Human Genome Project and I had government funding and I was in that camp for a very long time thinking that we needed government to fund market failure. In the case of the human genome project, is was a very interesting test case for this because everyone was saying that government needed to put three billion dollars into the human genome project because no one else would. Then Solera shows up saying we’ve got new sequencers and we can do this for a hundred million dollars over one year, so government doubles down, decides to put more money into the human genome project even though there’s an example of a market participant who’s going to solve the problem and they did this on the basis that all the private guys are greedy and that they’re probably going to patent the genome so we have to do it to keep it public. The NIH ended up with more patents than Solera on the human genome at the end the end of the day, so it was a pretty blunt lesson where I lost my love that this NIH system. There’s a bias in academia for centralized hierarchy in medicine without a doubt and the W.H.O. is like their emblem. However, you’ve got to be very cautious with people that are on that boat because there aren’t market forces involved in their research. When you write a government grant, a lot of people say you need the government to write these grants because no industry is going to fund this ant farm research and it’s really early stuff and it has to be done by the government because the private sector won’t fund it. I’ve written government grants; we’ve pulled in over 32 million in government grants over my career and I’ll tell you there isn’t a single grant we wrote that didn’t cost us at least a million dollars to file. The private sector is funding this stuff.

They’re just enjoying the fact that they’re getting freebies from the government in the process of getting non-dilutive capital into the company by betting a million bucks for some of the preliminary data that goes into the filing.

You better believe the private sector does have an interest in these things and this concept of market failure is a complete fraud. This is a way for people who know how to grease the system to basically write grants to get money into their private company that’s non diluted. The private sector is there though and they are the ones who actually put the first money out because they did the preliminary experiments. The people that are in that system, they’re always getting government pay checks and there is no cost to them; they don’t have a competitor that is necessarily competing with them per se for that money, they don’t have a market review. You might get twelve six to twelve people in your study section and almost all those people in your study section for a grant are on the boards of various private companies throughout the biotech industry. When you’re in the marketplace you don’t have six people bottleneck and make a decision on whether the research should be done, you have the entire marketplace telling you you’re wrong or you’re right. Trying to get something done in the free market, you actually have more scrutiny in the free market than you will get from the peer review at the study section and those people in the study section, those same people are on the boards of these other’s companies so they’re just a sub selection of the marketplace. You’re basically taking a statistical sub sampling of brains, applying it to the review process and then handing out government money. In the free market, you have all of them critiquing your work. There isn’t really this this perceived notion that the market is not going to do this, we need of the government do it instead, that’s all fantasy. That’s not really how things work and in the biotech space, so I think you’ll find with a lot of the folks that have academic funding, they believe the government needs to be in charge in cases like this. They don’t see that the free market actually delivers results a lot faster and they tend to have a — ‘Oh they’re greed based and we’re public servant based’ except for the public servant side of it takes their money through taxation which no one can actually refute. The breed is really coming from the government side. If you don’t like stem-cell research for ethical reasons, doesn’t matter, we’re taking your money anyway and doing it.

Same thing is true with gain-of-function mutations on viruses; they were funding that for a while with our tax dollars which who knows — maybe you played a role in one of these viruses emerging?

It is very dangerous research, but you can’t vote or opt out of it in the private sector. You can say I am not funding that because I think that’s just shady stuff, I’m going to put my money in the startup somewhere else. So, there aren’t the same economic incentives on government-funded research. There are not those review mechanisms and there aren’t those market forces that help balance it. I’m not surprised that you ran into people throwing stones at you if you critique to W.H.O. because the W.H.O. is just another one of these hierarchical systems that’s trying to tell the rest of the world what to do.

VC: How have your academic friends embraced you since you have taken this position?

KM: They tend to point to the weed stuff I’m doing to discredit me. It’s not a popular opinion but you know it’s just been informed through experience. I’ve been on the government side of things and then I’ve gone into the entrepreneur side of things and you get a very wholesome picture that way; you see how things operate on one side of the fence and then you see how they operate in the free market side of things. We by no means have a perfectly free market, it’s regulated to hell, but I believe it is what’s responsible for maybe some of the numbers you’ve seen at the World Bank. When you look at the World Bank, they have done a good job measuring how many people are coming out of poverty; there is been more people coming out of poverty in the last 50 years than all of human existence. That doesn’t happen with orange man in charge; that happens because the economy is growing, there is more interactions between people because we’re more connected, so there’s more win-win relationships that are being discovered throughout the world by being hyper networked. As a result, we have GDP that’s growing even though population is growing but that can’t happen in their model of it being a fixed pie. right like ‘I’m rich, my wealth came at the cost of someone being poor’ — that cannot be true if more people are coming out of poverty than ever before concurrent with population growth. That means the pie is getting bigger. Why is the pie getting bigger? It is getting bigger because we’re more networked and we’re finding more win-win relationships by being more networked. Its free-market economics that are driving this not structured hierarchical economics.

Let’s keep the conversation going,

Vance

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