I just finished Rainer Kattel’s “How to Make an Entrepreneurial State”. The book tackles a simple but profound question: why could America put a man on the moon in the 1960s but can’t solve homelessness? Why did government labs invent the internet but now struggle with basic digital services?
If you’re curious about how governments can get things done, this is worth your time.
The focus problem
Here’s what struck me most: NASA had one job—get to the moon and back safely. ARPA (which created the internet) had one job—create technology surprises before America’s adversaries did. Clear mission, clear success.
Today? Most government agencies are asked to “promote innovation, ensure equity, protect consumers, facilitate economic growth, address climate change, and enhance competitiveness”.
This resonates deeply with what I’ve learned building products. Focus requires courage. Saying “this is the one thing we’re doing” means saying no to everything else. Politicians hate this. The upside is small, everyone whose priority you didn’t choose hates you. But without focus, you get paralysis.
The stability-agility paradox
Kattel identifies something governments struggle with that companies don’t: they need to be both stable (keep the lights on, deliver services reliably) AND agile (innovate, solve new problems).
His solution isn’t to build an “innovation lab” next to the boring bureaucracy.
It’s to rebuild organizations with both capabilities built in. Think of it like this: the destination should be stable (we’re going to the moon), but the route should be agile (we’ll figure out how as we go).
Sweden’s innovation agency Vinnova shows what this looks like in practice. They start by asking “what kind of society do we want?” Then they set concrete social goals that matter to people.
For example: “ensure every pupil in Sweden eats a healthy, sustainable lunch.” It’s an outcome that a parent can understand and care about.
To achieve this, Vinnova brings together farmers, food companies, schools, nutritionists, kids, parents, and yes, technologists. They run experiments in different regions. They test what works. Some schools might try local sourcing, others new menu systems, others vertical farming partnerships. The destination (healthy, sustainable school lunches) stays stable, but the path is discovered through experimentation.
Vinnova’s approach asks the society question first, then deploys innovation to get there.
The third way
I was reading the Breakneck: China’s Quest to Engineer the Future book the same time and I found myself thinking about something Sten Tamkivi talks about: how the world needs something different from Silicon Valley’s extractive model and China’s digital authoritarianism. Europe, with its focus on human dignity, could be that third way.
Silicon Valley optimizes for value extraction, how to capture maximum value from users. Every click, every scroll, every second of attention is monetized. You’re not the customer; you’re the product being refined and resold. China optimizes for control, technology serves state power and social order.
Maybe Europe could optimize for something else: empowerment. How to distribute agency across society rather than concentrate it.
Think about GDPR. Yes, it’s annoying with all those cookie popups. But it established something radical: your data belongs to you, not whoever can harvest it.
Martin Luther King Jr. once said: “It may be true that the law cannot make a man love me, but it can stop him from lynching me, and I think that’s pretty important.” The same principle applies to tech regulation. The law can’t force corporations to see you as a human being entitled to dignity rather than an ambulatory wallet to be optimized. But it can make them treat you fairly, even if they don’t think you deserve it.
But here’s where Kattel’s book becomes crucial: regulation alone isn’t enough. GDPR can force Silicon Valley to add privacy controls, but it can’t create a European alternative to Google. It can make Facebook show you cookie notices, but it can’t build a social network that doesn’t treat attention as currency.
That’s where mission-driven innovation comes in. Not just regulating what exists, but building what should exist.
Building organizations that work
Kattel outlines five types of innovation organizations:
- creators (research institutes),
- funders (grant agencies),
- doers (implementers),
- intermediaries (facilitators), and
- rulers (regulators).
Most countries, including Estonia, try to make one organization do all five under a banner of efficiency.
But it’s like asking someone to be both referee and player. It creates confusion and makes them bad at everything.
Each organization needs ONE primary role. When Estonian Business and Innovation Agency tries to be creator, funder, doer, and intermediary simultaneously, it ends up mediocre at all of them. Goals conflict. Accountability disappears.
The conditions for success
But good ideas need the right environment to survive. Kattel argues that effective innovation agencies need three things. All three are deeply unfashionable in modern governance.
First, patient capital. These agencies need funding commitments that last years or decades, not budget cycles. DARPA and NASA succeeded partly because their budgets weren’t hostage to every election. They could take real risks knowing that a failed experiment wouldn’t mean next year’s funding gets cut.
Second, arms-length independence. Innovation agencies need protection from daily political interference while still being accountable for their mission. The moment politicians can redirect an agency’s priorities to serve short-term electoral needs, focus dissolves. You can’t do decade-long research if your direction changes every four years.
Third, tolerance for failure. Innovation means running experiments. Experiments mean many won’t work. In the 1990s, the US Advanced Technology Program started successfully backing emerging technologies. It got attacked precisely because it was working. It challenged the ideology that government shouldn’t pick winners. Any serious innovation agency needs political cover that accepts failure as the cost of learning, not evidence of waste.
Without these three things, patient money, institutional independence, and permission to fail, you can design the perfect agency on paper and watch it get captured, defunded, or paralyzed within a single political cycle.
The bottom line
I didn’t read Kattel’s book as being about bureaucracy reform. To me, it’s about how democratic societies can build things again.
Europe’s real decision isn’t whether to point out problems or to build things. It’s whether to follow systems that concentrate power and control through technology, or to choose systems that use technology but keep people’s freedoms and democratic control.
The book ends with a warning: “If this sounds difficult and expensive, the alternative is not meeting the challenges of our times.” He’s right. The question isn’t whether we can afford to rebuild government innovation capacity, it’s whether we can afford not to.
The 1960s had the moon race, driven by the Cold War. The 2020s have climate change, AI governance, and rebuilding trust in democracy. These challenges require the same kind of focused missions, clear mandates, and organizational courage.
But we shouldn’t just ask “can we build it?” but “what kind of society do we want?”
That’s a conversation worth having.