Rebuilding the Innovation Engine: How We Got Here And What Comes Next
By Dietrich Stephan, Ph.D.
"The pioneer spirit is still vigorous within this nation. Science offers a largely unexplored hinterland for the pioneer who has the tools for his task. Scientific progress is one essential key to our security as a nation, to our better health, to more jobs, to a higher standard of living, and to our cultural progress." — Vannevar Bush, transmitting Science: The Endless Frontier to President Truman, 1945
In 1945, Vannevar Bush, American engineer and inventor, presented President Roosevelt with a report called Science: The Endless Frontier. He argued the federal investment in science that helped win World War II should not stop at the armistice. Sustained support for basic research, he wrote, was the foundation upon which national health, prosperity, and security would be built. Congress agreed. The National Science Foundation (NSF) was established in 1950, and the National Institutes of Health (NIH) was formalized and dramatically expanded into the biomedical engine it became. Together, they created something genuinely rare: a government-backed infrastructure that funded the best minds in the country through an apolitical peer-review process, with no short-term pressure to commercialize. What followed was the greatest innovation engine the world has ever seen, and the foundation of the economic leadership the United States still enjoys today.
The bet paid off in ways that compound over generations.
What Basic Research Actually Built
When I trained at the National Human Genome Research Institute in the late 1990s, the NIH campus in Bethesda was electric. Dozens of research buildings filled with the best scientists in the world, doing work with no immediate commercial timeline and no quarterly review board to answer to. The mandate was to generate fundamental knowledge. The expectation was that this knowledge would eventually matter enormously, though no one could say exactly how or when. The same was true when I was running research teams funded by extramural NIH grants — we knew we were pointing in the right direction with our research, and as insights became available, we would quickly and efficiently interface with the venture capital communities to productize those new insights.
That ambiguity of basic research was OK. It is not meant to be perfectly efficient. It is meant to allow, as a whole and at-scale, for us to build the necessary foundation for economic leadership.
In addition to its dynamic intramural campus in Bethesda Maryland, the NIH seeded academic institutions across the country with extramural grants, creating a distributed national research enterprise with a mandate to transfer the resultant intellectual property to the private sector. The NSF funded foundational science that later became GPS, the internet, and the genomic tools that launched modern biotech. As ASU President Michael Crow has noted, Elon Musk would not have Tesla or SpaceX without the decades of academic research NSF underwrote. The same is true for AI, mRNA vaccines, and CRISPR. None of it emerged from quarterly earnings calls. It emerged from basic science funded by taxpayers who were never promised a specific return.
The return has nonetheless been extraordinary. Every dollar invested in NIH research currently generates $2.57 in economic activity. Over the last decade, NIH funding has driven more than $822 billion in new economic activity and supported an average of 370,000 jobs per year. That story has never been told clearly enough, and the silence has cost us.
The Pipeline That Fed Everything
What Bush envisioned was a three-stage system that no other country has fully replicated. The federal government funded basic research with no obligation to produce a product. Those discoveries attracted venture investors willing to accept risk in exchange for upside. And when something reached commercial scale, large industry players brought their manufacturing and distribution muscle to bear.
Each stage required the one before it. Venture capital did not fund basic science because it was too early and too uncertain. The federal government funded it because it was the only actor with both the public-good mandate and the time horizon to do so. Bell Labs is the counterexample people reach for, but Bell Labs existed because AT&T was a regulated monopoly that could absorb a long-term research engine. That model does not scale nationally in a shareholder-driven economy.
The system worked because the actors played different roles. When those roles started to blur, the system began to strain.
Where The Drift Began
The erosion has been gradual. NIH funding as a share of GDP has declined. Peer review processes have shifted toward funding the familiar over the bold. Investigators have learned to frame proposals in ways that look safer and more incremental. The translation pathway from academic discovery to venture investment has grown more congested, and early-stage biotech has never fully recovered from the post-COVID capital collapse.
Meanwhile, the public has never understood what NIH and NSF actually built. Every pill marketed on television, every cancer therapy approved in the last thirty years, every vaccine that ended a pandemic has roots in federally funded basic science. No one made that case consistently. NIH directors did not thump their chests about it. Political leaders did not build it into their platforms. The result is that institutions responsible for an extraordinary share of American health and economic competitiveness are perceived, in many quarters, as overhead.
That is a story failure with real consequences. We need to remember the strategic reasons behind the formation of the NSF and the NIH and how these vehicles have driven the U.S. to dominate the world in technology innovation and economic output. This is now at risk because of a lack of clear understanding of the value of this unique system.
The rest of the world has not stood still. China has made sustained, deliberate investments in basic research over several decades, building science cities, funding academic institutions, and deploying capital at scale. Europe and the UK are doing the same, and as federal funding pressure has intensified at home, they have been welcoming American scientists who want to keep doing serious work. More science happening globally is a good thing. But there is a meaningful difference between a world where the U.S. helps lead that progress and one where it watches from the sidelines, and right now the trajectory points in the wrong direction.
What Comes Next
I have spent twenty years building companies at the frontier of life sciences — new molecular diagnostic tests, new therapeutics, and new tools, starting with Navigenics in 2006, when sequencing an individual's genome to understand disease risk was considered fringe and some of the embedded concepts we pioneered were heretical at the time. It is no longer fringe. Personalized prevention of chronic disease to extend the healthy lifespan and reduce the cost of care in the last years of life, more genetic medicines, and combination oncology therapies to hit all pathways driving tumors simultaneously based on complex circuit models are where the most important medical science of the next twenty years will happen. All of it depends on a basic research foundation that is under more pressure than it has faced in a generation.
The answer has to start with honesty about what basic research is and what it is not. It’s not a short-term stimulus, not a program to evaluate on a five-year return horizon, but infrastructure for the future. The kind that takes decades to build and much less time to dismantle.
Federal funding can be restructured to reward genuine risk-taking. The tech-transfer pipeline can be modernized. Philanthropic capital can complement rather than substitute for public investment. What I know from my time at the NIH and everything that came after is that the model worked because someone had the courage to take a long-term view at national scale. That culture — the conviction that investing in frontier science is one of the highest-leverage things a country can do — produced GPS, the internet, CRISPR, and more.
We can find that conviction again, even if it means finding new institutions capable of holding it. Either way, the starting point is remembering how we got here in the first place.
About The Author:
Dietrich Stephan is a repeat founder, CEO, and board director who has built therapeutics, diagnostics, and life science companies from inception through IPO and M&A, including Navigenics and NeuBase Therapeutics.