Innovation Lessons of the Internet

In the midst of a trend to credit the federal government with all of the great things that have been invented or built since WW II, it is important that we study the history and the lessons it has to offer. The WSJ has a useful op-ed about the start of the Internet that untangles some of innovation myths of the oft-cited endeavor.

Government Successes in Innovation

I give the US government massive credit for their role in fundamental research. With the decline of major corporate labs (e.g. Bell Labs, IBM Research, etc), the feds are left as the primary funder of basic research in the US, with positive effects that span the globe.

I also believe the government has done amazing work in what I call “mission-driven innovation”, where the government is driving for a specific outcome in order to fulfill a focussed mission that it has. I would count supercomputing in this category as well as many other defense, health and agriculture-driven innovations. In these cases the government is funding innovation, but is also a major customer of the innovation, helping to create an early market. [Note: while many people put the current clean energy push in this category, I don’t count the current manifestation as mission-driven. There is no articulated, focussed mission or strategy; “Let’s try everything” doesn’t count.]

The Early Internet

In addition to the notes in the WSJ article, it is important to understand the state of computer networking during the early days of the Internet in the 80’s. First, there were already widespread computer network operating, and early versions of network services, such as email, already existed. What was missing was agreement on a protocol that could span networks in a scalable way. This is what the Internet Protocol (IP) proved to be great at. Furthermore, the Internet Protocol was an open protocol (i.e. not proprietary and controlled by a commercial organizations), so implementations of the protocol were able to spread freely.

But the ascendance of IP to its current role in global networking was not at all clear at that time. However, it is easier in retrospect to look back and see these, and other features as critical to its success. The government deserves credit for funding the research that led to IP, and for supporting the open design that allowed it to spread so rapidly.

The Government’s Key Role in the Internet?

But I believe that the government’s key contribution to the Internet happened in the 90’s. While a couple of government agencies ran their own IP networks (e.g. ARPA, NSF), and the government continued to fund basic research in computer networks, the bulk of the design and buildout of the Internet that we know today were happening outside of the government.

By the middle of the decade, Netscape’s meteoric rise had finally awoken Bill Gates at Microsoft, who’s famous letter to the company served to alerts its vast array of businesses to the potential of the emerging network, and the threat to Microsoft if it didn’t embrace the technology. For me this letter marks the start of a 5-year period of broad awareness, where individuals, mainstream companies and governments gradually came to understand the Internet as an open platform for innovation, with its potential to transform nearly every aspect of our business and government. [I consider the end of this period is marked by the $82.5M IPO in February of 2000; at that point the broader market had clearly taken the potential of the Internet to heart.]

You may feel like you missed the role of government in the Internet in my description of this decade, and you’d be right. Aside from some mission-driven organizations operating their own IP networks (and helping to prime the pump for early IP-based networking gear), the formative years of the Internet as an unprecedented platform for innovation were largely free of government involvement. Yes key inventions like HTML involved government funding, but the government was yet to be consciously involved in the design, build out and operatin of the Internet.

To this day the Internet is governed by a independent non-profit organization, with the backbone network operated and managed by commercial companies. To this day you can register a domain name and put an innovative new service on the Internet, all within a period of hours, and all without a transaction of any kind with the government.

Of course it can only be a thought experiment, but one can’t help wondering what the Internet would be like today if the federal government had awoken to its full potential in 1990. How open would it be? How cheap would it be to use? How far and how fast would it have grown? What would our economy look like?

Another thought experiment would be to ask what the Internet look like if the government had set out with the explicit goal to build it. What if Reagan, Carter or Bush had decided to recreate the mission to the moon and build the mother of all networks by the year 2000? Is there any chance the result would look like the Internet we know today?


The US government is the primary driver of basic research today, and drives broader innovation through some of its mission-driven endeavors. It deserves a piece of the credit for the creation of the Internet.

But many are extrapolating from these facts and overestimating the role of government in innovation, and underestimating the innovation-driven role of the private sector in bringing basic science to market. Furthermore, many are overlooking the ways that government intervention can, and does, stunt the growth of valuable, new technologies.

The Internet presents a wonderful opportunity to study the role of government in innovation. Let’s make sure we’re open to all of the lessons it has to offer.