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How important is it for us to have AI sovereignty? And what does that mean in reality? That's what we're talking about today. Do entrepreneurs feel less welcome in the UK now than they did a few years ago? Plus, does the government really understand that in order to create and support the next great British businesses, you need to lose some money along the way? So Matt Clifford is a British tech investor who co founded the startup program Entrepreneurs First. He is also a man with a lot of influence when it comes to UK AI policy, having advised former Prime Minister Kia Starmer and one of the people to set up the first government body dedicated to AI safety. So he's a man who knows a lot about what's going on in the AI world. This episode is brought to you by Octopus Energy. Greg Jackson, the CEO, is with us now. So Greg, I've got a question for you. Is it true that by 2040 in China there will be no petrol stations because everyone will be driving electric cars?
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Yeah.
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Crazy as it seems the Chinese state oil company, the one in charge of its petrol stations, is planning on having none by 2040. If you visit China today, what's really striking is the roads are quiet. I mean, all of the two wheeled vehicles that used to pump out pollution and noise are now electric. Pretty much all the taxis, buses, increasingly more than half the private cars that are sold in narrow electric. And even this year so far, 25% of their trucks are electric. So that electrification means that they're going to be less affected by global oil shocks and they won't have any petrol stations.
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Greg, thank you very much. Now, on with today's episode.
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Matt, really great to see you. And I really wanted to start with where we are now and in particular the dismantling of the Department for Science, Innovation and Technology. When it was first announced, I have to say I think both of us were a little bit anxious because we were worried that this meant that the new Prime Minister was downplaying technology and in particular the artificial intelligence agenda. What is your take on what is happening, why they have dismantled it, and whether we should be as anxious that we were as we were initially?
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Yeah, I think, as you said, I was very concerned when rumors about the move started, but maybe if I start with some of the positives that have come out since and then almost talk a little bit about what I think the tech community would want to see, to feel that actually things were in a good place. So, you know, the good news is, I think, is although, you know, I think it is a real shame to see DESIT dismantled and I think its achievements in just three years are, I think, pretty extraordinary. You know, I think it is totally fair. As, you know, various people in the new government have pointed out that actually in some ways AI in particular is being elevated now. So, you know, we have for the first time the AI Minister attending Cabinet. We have an AI Task force in Cabinet Office jointly reporting to the Prime Minister and the Cabinet Secretary led by a senior civil servant who was doing the senior AI role in dcit. So in terms of the teams that were built in dcit, which I think were very, very high calibre, both from internal Whitehall talent and external experts, they're being maintained. They're being moved to different places, but they are being maintained. I think the question that people will still have is just what do we actually see now in terms of strategy and delivery? So I'm a little bit biased because I wrote the strategy for the previous Prime Minister, the AI Opportunities Action Plan. I think it's a good strategy. I think that said, I'd be the first to say it's two years since I started working on that. Lots has changed in AI in AI years. Two years is forever. And so I would like to see a recognition that actually in that time the technology has advanced a huge amount, the politics has changed a lot, the geopolitics has changed a lot. And so, if anything, I think we need to see more emphasis, more resource, more Prime Minister time on this topic. And really the proof will be in the pudding whether we get that.
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Can I ask them? Because when this announcement came out about the new AI Task force, And as you rightly said, you know, it's got the AI Minister Kanishka, who we've had on the show and chaired by Patrick Valens, as who we've also had on the show as well. And within that announcement was this statement that for the first time AI will be positioned at the very center of government. So what is it that they're going to do now that they weren't doing before? Because surely like in the strategy you've you wrote for the previous Prime Minister and everything else, AI should have been at the center of that. So what's going to change?
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I think one way to think about why this model could work and you know, probably if you were going to make the strongest case for the changes that the incoming government has made, you would say on areas of AI policy that were effectively entirely within decit's gift, it's performed really well. On areas of policy that are cross cutting and require coordination across departments, it's been much more challenging. And I say that with some scar tissue, having been in number 10 and found coordination with, there's a ton of planning implications of AI, there's a ton of energy implications of AI. These are things where operating as a department in the periphery is really hard and where if this task force genuinely has the will of the Prime Minister and the Cabinet Secretary, then it can actually, I hope, make some of the trade offs that are very hard to make in a department.
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It seems to me these task forces are a brilliant innovation if they have a very clear set of goals. And in particular if they have one goal in particular. Could a task force like this be as powerful as the Vaccine task force?
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Well, I would say there are both analogies and disanalogies, if that's a word there. The disanalogy, as you say, is there's not this one clear thing. I think you could create a one clear thing. It could be we would like to see an extra 5 gigawatts of domestic AI compute capacity built in this country by 2030. That would be a very different task force, I think, from the one that's planned where the analogies are helpful, I think, and it's huge credit to Kate Bingham and her team in the Vaccine Task Force that they were able to make a success of this. The ability they had to cut through interdepartmental disputes, go straight to the PM and get a decision. Their ability to procure things differently using different rules from the way we might normally do procurements, their ability to hire differently, these sort of capabilities, these freedoms I think we've seen, first with the Vaccine Task Force, then with the AI Security Institute in Desit, I think these freedoms actually do allow you to do things differently and faster. But as you say that, the thing that the government will have to decide now and be very clear on is what is the overriding goal of this task force?
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Because on the point about procurement, I mean, we've had various people talk to us about how. How difficult it is and, you know, we're talking businesses in the air arena to who say it's really impossible to cut through the system and be taken seriously against the, you know, American businesses or these other businesses that are not putting money in the economy in the uk. So do you think that is genuinely going to change, then?
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It's very hard to know. Again, to Robert's point, I think until it's very clear exactly what the overriding goal of the task force is, it'll be hard to say. I have seen encouraging things in the last few days, not least from the new Chancellor, John Healy, talking about procurement and putting more emphasis on the broader benefits of, of buying British. Now, I have to say there's a part of this that may not be a good thing. I don't think we need to buy British on every good. That's probably a way to spend too much money, get poor value for money and actually end up in a worse place for the taxpayer. Where I think there is a case for buying British is in areas where sovereignty is actually of huge strategic importance to the uk. So, actually, the truth is that if we're buying, maybe I'm going to make some enemies saying this. If, you know, if we're buying stationary, I don't care whether we buy British or not. I don't think it's a huge strategic asset to have powerful British paper companies. However, I think it's very clear that we're now operating in a geopolitical environment where having valuable and powerful British AI companies is very important. We've seen that very clearly in recent weeks and months as the US administration has started to see AI much more as a national security issue, willing to export control the most powerful AI models. And I think you start to see, well, there probably is a case, even if it's not the model layer, the chords, the chatgpts, where we would want to see, we want great British chip companies, we want great British drone companies, robotics companies, and actually using the procurement power of government to support those companies if they're good, is a really powerful lever.
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I went in to see Palantir recently and was really actually impressed with the power of what they offer the British public sector. But we've already heard from Andy Burnham and people close to him that he is one of those politicians who is anxious about the extent to which Palantir is deployed through the NHS and other public services. So I suppose I'm interested in whether you thinking. Whether you think that the British government is right to be anxious about overdependence on one American company, Palantir, when it comes to, for example, being able to process NHS data, for example, in a much more streamlined way. And if they're right to be anxious, how. What is the best way to reduce UK dependence on a company like Palantir? Are there rivals out there that are British that might be in a position to offer something as effective as Palantir within the near future? If there isn't, how could a British government encourage the development of a British equivalent?
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So, yeah, I think this is really important because it touches on, I think one of the big confusions in the debate about sovereignty, which is that when we say sovereignty, we often mean one of four or five different things. The sort of thing you're talking about is, do we have control over our data? Could we get it out if we needed to? Is the data processed under our laws and under our norms? Actually, my view, which may not be a very popular one, is that on this level, things like Palantir are not really a threat to British sovereignty. Actually, Palantir holds and processes data under our Lords, our laws. Sorry. There might well be people that would like to see a British company doing that, but ultimately, I don't think there's a significant risk to the UK's ability to operate, because actually, the software that's being run is being run here. It's been run kind of locally and we have a lot of control over that.
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So, obviously, I understand your point about sovereignty, but even on your own set of concerns, surely it matters that one company, an American company, Palantir, has this effect of monopoly on joining out incredibly important data within the British public sector. This is a hugely valuable business. Why should it all go to an American? Why should all the profit go to an American company?
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Well, so I think there's two ways of thinking about this, which is, is there something. Supposing we decided it was really important to have a UK version of Palantir, and again, I'm not. Not totally convinced that's where I would place my chips. But let's say that we did decide that. I worry quite a lot about solutions to technological sovereignty that are very top down, government led, picking a winner. I think the track record of that working is very poor. For decades, various parts of Europe have tried to do this with things like search engines with basically zero success. Now there are some people that would say, look, we got Airbus. Airbus was effectively a top down thing. I just think there are so many differences between that kind of top down engineering project and software. But I think what we could do and what I do worry about a lot and what I hope this government understands is that the way to get, not just in what Palantir does, but in any part of the technological supply chain, the way to get British competitors is to make the UK a great place to start and scale businesses. Now, in some ways it is, as you may know, I spent most of the last 15 years building and funding and helping people build technology companies and the UK is a great place to start companies. But there are real risks. We've spent a long time as a tech community in this country building an ecosystem that founders, entrepreneurs, want to be. I would point to two things that could put that at risk. One is that I think a lot of the rhetoric over the last few years around tax in particular, but really more of a sort of mood music about are people who are building businesses people that we want to have here? Are they people that we value, admire, want to build up that I think has gone in the wrong direction. And actually a lot of entrepreneurs sadly have left the country feeling that they're not welcome here. And that's a problem. There's a second problem which is well known and I think you've talked about on the show before, which is we do still lack scale up capital relative to the US and so there is still a problem that British founders get to a certain scale in the uk, raise capital in the US and end up moving there. For me, a lot of that is downstream of our pension system. Our pensions still don't invest enough in private assets, in risk assets, relative to their US peers. Successive governments have talked the talk on this, but we yet see a real difference. And I think if we can't make that change happen, that's the biggest reason that you don't have a UK Palantir, is that probably the UK Palantir ends up moving to the US to raise the capital they need to scale.
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So can I ask, because we talk to entrepreneurs a lot and you know, sometimes they're saying they don't feel like, you know, welcome in the uk. There's not the finance in there. Or the support that they need to keep them there? Do you think that's fair? That they're not as welcome here as they once were?
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So when it comes to I think there are three kinds of sovereignty that I do think we should worry about. The first is value capture. Do we have the companies, the AI companies in the UK that mean we're capturing value here, generating jobs and tax receipts here? That's key. The second is about do we control critical inputs to our economy? As the economy becomes more and more driven by AI, are we protected against other countries deciding to shut off access to key inputs? If not, then we could find ourselves in a very difficult situation. And the third is as the global governance of this technology evolves, do we have a seat at the table? Do we have a right for our voice to be heard in making critical decisions about how this technology is developed and governed? We saw very recently over the last two months the US administration putting export controls on the most powerful AI models built by anthropic. And what that means is that in theory they said no non US citizen can use these models. So today maybe that's a pretty marginal thing. But you can imagine in a world where actually the economy is really dependent on powerful AI models, if a US administration decided to do that and we were cut off overnight, that could have really huge consequences for the British economy. So there's kind of sovereignty there of do we, do we control critical inputs to our economy? Maybe that sounds far fetched today, but to me the echoes of what happened in 2022 when suddenly because of the invasion of Ukraine, we ended up without access to the energy inputs that we expected. It was caused a huge economic crisis. Then the third kind, which is a bit different, is do we have a seat at the table? This is a technology where the governance of it is going to really matter. It's a technology where values are embedded in the technology, where we might want our own flavor of what kind of AI we get. And we're kind of used in the UK to having a seat at the table. We're on the UN Security Council, we're in the G7. One thing I would say repeatedly to ministers when I was working in government was if they were creating the AI Security Council today, it's not obvious that the UK would have a right to be on it by virtue of the companies that we have. So there's another kind of sovereignty which is how do we earn that seat at the table?
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Matt, there's still a lot to get into on all of this AI. Policy stuff, but sit tight for a couple of minutes while we go through a quick break. This episode is brought to you by Accenture Now. When your advertising operations fall out of sync, campaigns slow down, insights get buried and opportunities get missed. That's why Spotify and Accenture are working together to reinvent the rhythm of ad sales using automation, analytics and smarter workflows to simplify campaign delivery and access better data data across the business. The result? Less time spent on operations, more time connecting brands with the moments and fandoms that matter most. To learn more, check out Accenture.com Spotify UK. Can I ask you, Matt, a bit about the. The kind of infrastructure side around AI? Because that's part of the problem is the speed at which we're not doing things in terms of data centers. And obviously that's a big deal up here in the Northeast because of what's happening potentially in Blythe and around Teesside. What does it take to get things built?
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So first I would just say, because I think a lot of people say, like, why do we even need this? Why does it matter whether we have data centers in the uk? Can't we just, it's all electrons traveling very, very, very fast. Can't we just use data centers in the US and this, again, is a sovereignty question. There's a lot of people who said before the invasion of Ukraine, oh, you know, energy is just a commodity you buy on the open market. Who cares? And yet we saw in the UK in 2022 the cost of not having domestic, domestic production, of not having energy sovereignty in the uk. My worry is that we could enter an era in the UK where the same is true of AI. And so I think it's very important that we have AI infrastructure in our own borders that we control that operates under our laws, even if it's international companies that are building it and own it. I think that's really important. As you've pointed out there, Steph, it's not trivial to get these things built. In fact, it's really, really hard. Now, there's a number of issues. One is planning. Obviously, these are huge construction projects, but the biggest one by far is energy. There are at least two distinct problems in energy when it comes to building data centers in the uk. One is just cost. As you know, we have the highest wholesale electricity prices in Europe. If you were to compare running a frontier data center in the UK versus say in France, it would cost you £400 million a year more in electricity costs alone in the UK to run it Here. So that's significant even at the scale that we're talking about. And then the other energy issue is actually just our grid. So getting a grid connection takes a very, very long time. In this country, there is a huge queue to be added to the grid. I remember when I was writing the AI action plan for the government being pretty shocked when people who wanted to invest billions or even tens of billions of pounds in building AI infrastructure in the UK were telling me that they were being given dates for grid connection in 2039 onwards, which in AI years is forever.
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Oh, my God.
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And so it's a real challenge in an industry that right now is extremely geared on speed, speed to power. How quickly can you get a data center online? At the moment, we're not in a position to be competitive on that, really. The sites where it's viable in the UK are those that have existing grid connections ready to go. But that's when you get into, understandably, political wrangling on what the right use of that grid connection is.
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So then how do you get past that?
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This is where you get a lot of careful diplomacy and deal making. I mean, my view, my personal view would be the amount of capital that is at stake in these deals is so large that there are absolutely ways to create win wins. The size of the pie is very large. And so what I would like to see is for UK national and local government to explore ways to actually share that pie with stakeholders locally. So you can imagine a world where we say, yes, we will accelerate a grid connection on this site because we think it's strategically important for the uk if, for example, the people building it, the beneficiaries of it, put aside some share of the value of the project for local investment, for creating jobs and training and investment locally. I think the sizes of, of these projects big enough that it's very easy to do that. In theory, in a way, that's a win win. And so I think we need to be a bit more savvy about the politics of this and say, how do we actually make building this infrastructure a win for all the different parties who are involved?
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You chair aria, which is this huge fund which provides funding for very, very early stage research into a whole range of really fascinating sort of technological and scientific areas, but most of which, you know, could well end up with a sort of serious commercial application. I suppose there's sort of a number of issues here. One of them is that I, I remember as somebody who has, you know, being immersed in, you know, essentially the pressures that are on government for decades. You know, as, as a journalist, you know, if I were in your position, I would be permanently terrified that at some point some Chancellor is going to look at what are really significant hundreds of millions of pounds going to Aria and just think, wow, they can't really prove that there are sort of short term returns for Britain from this. If I were in your position, I'd be terrified that at any particular moment some Chancellor looking to save some money and allocate it to a short term populist gimmick would just close you down. Do you lose sleep at night about this?
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I'm so chronically tired, Robert, with two small boys, that I never lose sleep at night over anything. I mean, look, you're absolutely right. What a remarkable thing Parliament did in 2022 in agreeing in a cross party way. This was voted, every major party voted in favor of Aria to create something that very explicitly would not produce short term returns. And not only did Parliament know that at the time, it was actually baked into the legislation. One of the things it says in the ARIA act is that ARIA can't be shut down for 10 years. Obviously they could repeal that, but there was an understanding, a cross party understanding that, yes, actually, if you want to see the huge long term impacts of fundamental breakthroughs in science and technology, then patience is what's needed. Everyone at Aria, the board, the exec team, takes that, that responsibility extremely seriously. Both for Aria's own sake, but also we feel what an incredible thing to be entrusted with as a symbol of actually the country's ability to make these long term bets. And so, yeah, we obviously spend a lot of time making sure that we're delivering good value for money, for taxpayers in particular. The thing that we really focus on in every board meeting, every time I speak to the exec, this is what comes up is we say, look, if you're going to do stuff this early, if you're going to do stuff this ambitious, you're taking a lot of risks. We're meant to. It says that in the RA Act. So the key question is, do we get the reward for the risk? How do we measure that? We're not a venture capitalist. We don't invest money for an expectation of financial return. Well, the test I use personally, as I say, if I look at the whole portfolio of Aria's bets, do I believe that if any one of them paid off, if any one of them worked out, then it would have been good value for the taxpayer? And when I look at what we're doing, everything from Programmable plants to energy efficient compute for AI through to robot dexterity. I think the answer is yes. So yeah, it will be 10 years before we know whether it's worked. But I think that's really baked into the model and I think that's the spirit in which everyone from Parliament through to the team has entered into it.
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So do you feel then that there is a freedom to fail? Because that's what, you know, the first time there is a, let's say a loss in this where one of the companies that's been backed by Aria doesn't work out and it hits the headlines and then everyone's going, what a waste of taxpayers money. But do you, you don't feel that pressure then that there is, you know, do you have freedom to fail?
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Freedom to fail is, is, is earned. It's, it's not something that can be, that can be granted. You know, it says in the REA act that ARIA should take risk, but we know that the way we do that will determine whether or not Parliament, government, the public, the media think we're doing a good job. So I think there's two aspects of this. One is what is the story that we're telling to the outside world? And we've tried repeatedly over the last two and a half years that ARIA has been incorporated to, sorry, three and a half years since the. ARIA has been incorporated to, to constantly tell a story about ambition, about what the world looks like if these things pay off and to be as transparent as possible. I think sometimes ARIA has, because of the debate in Parliament back in 2022, people think of ARIA as opaque or trying to hide from scrutiny. If you actually go on the ARIA website, we publish more or less everything, every program, thesis, every, all our reasoning about why we think something's exciting and it's all there for people to read. We hope we earn trust through building in public. But the other thing about freedom to fail, and it's also something I've learned as an entrepreneur and as an investor, is it's also about your internal culture. What do you reward internally? What do you celebrate? Actually, if you only celebrate things that work, then you'll get people optimizing to find things that work, even if they're not very ambitious. And so we've worked really hard at ARIA to build a culture of ambition, to build a culture of optimism, one of obviously seriousness about the stewardship that's core to what we do. But ultimately saying, yeah, actually you can fail here as long as you're failing because you set your Sights so high. Not because you're doing stupid stuff off.
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Yeah. But just on that though, you can, you know, decide a story that you want to tell the outside world, but the media can do a completely different one to the one you're telling.
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C
Yeah. You know, one thing we've been really impressed by over the last year in particular is that for any organization like ARIA that's doing high risk, high reward research funding, there's always going to be a way to spin anything we do in a way that sounds preposterous. And for sure we've had our fair share of stories that are like that. Headline grabbing. Aria Wants to Dim the sun, which we don't want to do sort of headline. What's been really impressive is that actually when we've then gone back and engaged with journalists and said, do you want to come and see what we're actually doing? We've had, I think, really great engagement from really genuinely interested, truth seeking journalists that want to understand. So there was a fantastic piece in the Guardian, which had previously run some less friendly stories on Aria, but recently they did this piece on some of our work in thinking about ways to refreeze the Arctic ice in the Arctic. And they wrote this in depth piece and I just picked up beautifully the combination of, of earnestness, of ambition and of engagement with a very broad range of stakeholders and communities affected by this to really show like, look, we might get it wrong, it might not work, but we're really trying to do important things in a way that's careful and thoughtful.
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A
Yeah. Because on that refreeze the Arctic thing, I mean, that's fascinating. I'd love to know more about that. Obviously what comes from it in a kind of, as a sensationalist view is it's geoengineering. This is us mucking about with, you know, biodiversity and everything else. So is that like, do you, is that the kind of thing you have to battle against? Is that what you mean when you're saying, you know, that this, ways that this is a scene that we then try and challenge.
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C
Yeah. For any given program there's going to be a take on it that is more sensationalist and that's, that's that's kind of fine as long as, as long as, you know, people know that they can come and read about what we're actually trying to do, you know, on our, on our website. And look, I think no one at Aria resents scrutiny. I think it's actually really key. One of the things that we've baked into everything we do is actually looking at the ethics of each program. Each program kind of has ethical advisors. We build in. We have an ethics committee of the board that looks at all the programs. So I think it's absolutely right for when people are trying to do research on technological capabilities that would be extremely powerful to scrutinize that and say, how might this be misused? What are some of the unintended consequences? One thing we've tried to do at ARIA is bake that into the process before we do funding, such that we're aware of the risk that we're taking, but we're doing it in a responsible and a conscious way. Actually, I think the example we've just been talking about is a good example where actually, I'm sure there are people that. That don't think it's the right approach, but actually the very careful work the team's done to engage people that have a different point of view has actually led to an improvement in how we do the work and what we fund. And you would encourage readers to go read that long read in the Guardian about the work we're doing on refreezing. And I think you get a sense of the care that's gone into it when you read that.
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D
Is there a sort of optimal way of deciding as and when this becomes a great success, a great commercial success, where the profits, where the value goes? And there are sort of two. Two questions here. We've had Mariana Matsukatu, the economist on the program, and, you know, one of her big arguments is that the public sector never gets the recognition in terms of essentially financial returns that it deserves for the enormous amount of work that it does to, in a sense, pave the way for these commercial breakthroughs. And then there is just a difference between the way, for example, American universities decide what share they're going to get and the share of profits that British universities get. Naturally, one of the things that's quite striking to me is if you look at British universities, actually, I think British universities are, some would say, slightly less generous to the entrepreneurs than American universities. Is there a right and wrong in this area?
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C
There are different models. Personally, if we just zoom out and look at the question of the role of universities in this, I think that the US model, at least the data suggests, looks like a better way forward. So in general, US universities take less equity in spinouts from their. Their staff, their faculty, et cetera, and sort of rely on the founders of those companies making money and donating money back to the university. And that seems to have worked really well at places like MIT and Stanford, broadly, having kind of worked with university based entrepreneurs for the last 15 years, I would say that large equity stakes for universities do put off would be entrepreneurs for obvious, obvious reasons. Now, to be fair to British universities, we don't have that culture of giving back in the same way as the US universities do. And so I think it is hard for the universities to have kind of one without the other. But I would love us to get to an equilibrium where we were more like the MIT model, where we take less as universities on the way out, but alumni give more when they have the means to do so on the way back. I think that's a better equilibrium. I think it produces a better culture of entrepreneurship. It's a hard place to get to. I think it's one of the ways that government could play a coordinating role. But yeah, I don't think there's a clear cut answer, but I would love to see that as the direction of travel.
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A
So, Matt, can I ask you about this UK Dynamism Fund and what it's all about? So you're advising on this, aren't you? So what is it and how do you decide what's dynamic or not? That's what I'm particularly interested in with it.
[36:11]
C
So the backdrop to this is something you'll both be extremely familiar with, which is that we're now entering close to 20 years of economic stagnation in the UK and the impact of that on the lives of the entire country is just deeply profound and I think underappreciated. Still, if we'd had the loss of output relative to the trend we were on before the financial crisis, if we'd had it in one go instead of as this slow stagnation since 2008, we're talking about a 30 to 40% loss of income for the country as a whole. People are 30 to 40% poorer than we would have been if we had not ceased to grow. And that's the worst economic catastrophe in the history of the country. And it'd be hard for the newspapers to publish that as the headline every day, but in a way they should. This is, is for me the single biggest issue. So the question is, how do you reverse that? I didn't create the UK Dynamism Fund. I've agreed to advise them because I think they're good people with the right motives. But more broadly, the thesis, the analysis they have is that we're suffering from a lack of dynamism, we're suffering from a lack of risk. Taking both at the individual level, but also at the corporate and investor level. We talked about pensions already. That's a great example of it. We don't celebrate in general business builders and wealth creators in this country in the way that we might do in the US we tend to worry a huge amount about the downsides to any given thing. We tend to privilege the voices of people who would be negatively affected by any change rather than those who would be positively affected. And so again, I'm not running the UK Dynamism Fund, but what I understand is that they want to fund a very broad based range of products, projects that change that, that tell a different story about the uk, that fund individuals to organize, take action, run campaigns, make content talking about this and also start to provide some counterexamples of extraordinary dynamism up and around the country. And I'm very excited about this. I think it's, to me the most important thing is that we reignite growth in this country. And the. I was very excited to see if I could help as they go about trying to do this.
[38:27]
D
And can I ask related to that, whether we're yet in a position to judge whether the new Prime Minister, Andy Burnham, gets this as what should be the overwhelming imperative of his government?
[38:43]
C
Well, I think it's very encouraging that he's talked a lot about growth in his first few days as Prime Minister. He's talked a lot about good growth. I understand why he's saying that at the moment, I take any growth. But yeah, I agree that good growth is better than whatever the alternative is. I think he has a really good point about the role of regional inequality in driving growth. Actually, it's true that we have had for a long time in this country a two tier economy where London is actually very rich and has been for a long time. And the rest of the country, including the part I'm from, Bradford in West Yorkshire, is not. And I think it's certainly true that if you try and break down where does the UK fall down relative to its international peers, the productivity of our medium sized cities, places like Manchester, as the Prime Minister has talked about a lot, and Bradford where I'm from, these are not as productive as second and third cities in other European US comparators. So I think if he can drive productivity in those places, that would be a huge win. And again, as I said right at the start about are we doing the right things on technology? The proof will be in the pudding and it will be. But I'm excited to see that he wants to Take a real crack at that.
[39:57]
A
Well, Matt, it will be very exciting to see what happens next, but thank you so much for your time chatting to us. And we're all going off now to read more about refreezing the Art Arctic.
[40:09]
C
Thanks, Steph. It's great to be here.
[40:13]
A
Well, that brings us to the end of that episode. But AI is obviously the thing every business and policymaker is talking about at the moment. So in the next episode, we're going to look at why Chinese AI needs to be taken more seriously. We've got Azima Zar just back from visiting AI labs in China, including Moonshot. We'll be looking at what it takes to win the AI race, if it matters that Chinese firms are banned from using American chips and whether an AI business can survive without energy generation capabilities. That's our interview with Azeem Azhar, the founder of the leading research platform Exponential View. We'll see you then. Bye bye.
[41:08]
B
Hello, this is Saul, David and Roger Morehouse from the Battleground Podcast. And we're here to tell you about an exciting new strand we're bringing out every Wednesday, the Big Picture.
[41:16]
C
Yeah, there's a lot going on in the world at the moment, as we know, Ukraine, which we cover every week, but also sort of wider developments as well. So we wanted to have a section where we did interviews with high ranking individuals, people who can illustrate and inform us of that wider world.
[41:29]
B
Yeah, we all get a fog of information and comment and we want to cut through that to give some real insight about the conflicts and geopolitics that are affecting our world today. And we've got a pretty stellar lineup to begin with, haven't we, Roger?
[41:40]
C
Yeah, I'm just prepping now for an interview with Radek Sikorski, the Polish foreign minister. Poland's very much a big strategic player now in Europe with the Ukraine war as well. So he'll be a fascinating interview. Who have you been speaking to, Saul?
[41:51]
B
Yeah, well, this morning I spoke to Al Khan, soldier turned politician who until recently was minister of armed forces, but resigned on a matter of principle because he felt the government wasn't committing enough money to keep Britain safe in the years and decades to come. And he had some really fascinating things to say. So do listen out for the Big Picture every Wednesday and also on Friday when we'll be covering the latest from the Ukraine war. And it's things are really hotting up there at the moment. To find out more, search for Battleground Wherever you get your podcast.

Summary7 min read

The Rest Is Money – Episode 300: "Does Burnham get AI?"

Air Date: July 29, 2026
Hosts: Robert Peston and Steph McGovern
Key Guest: Matt Clifford (British tech investor & prominent AI policy advisor)

Episode Theme

This episode dives deep into the intersection of AI, national economic strategy, and UK sovereignty. Peston and McGovern speak with Matt Clifford—investor, founder of "Entrepreneurs First," and a major shaper of UK AI policy—about the dismantling of the Department for Science, Innovation and Technology, the drive for AI sovereignty, whether government and infrastructure are ready for the coming AI wave, and whether the new Prime Minister Andy Burnham “gets it” when it comes to growth, innovation, and tech investment.

Key Discussion Points & Insights

1. The Dismantling of the Department for Science, Innovation and Technology (DESIT)

(2:50–6:00)

Concerns and Silver Linings:
Both Clifford and the hosts express initial anxiety about dismantling DESIT, fearing it signals a deprioritizing of tech and AI policy.
Positives:
- AI is being "elevated": Direct AI representation in Cabinet, with an AI Minister (Kanishka) and an AI Task Force reporting to the PM and Cabinet Secretary.
- Talent retained: The high-caliber teams from DESIT are being maintained and moved, not dismantled.
- Call for Strategy Update: Clifford notes, “In AI years, two years is forever,” and urges renewed strategic focus and resources.
Notable Quote:

“We need...more emphasis, more resource, more Prime Minister time on this topic.”
— Matt Clifford (5:18)

2. The Role and Potential of the New AI Task Force

(6:00–8:20)

Coordination Challenge:
Clifford argues AI policy often cuts across government silos—from planning to energy. A centralized task force, if empowered, could overcome infamous Whitehall inertia.
Task Force Analogy:
Peston asks if it could replicate the success of the UK’s Covid Vaccine Task Force.
Caveat:
AI doesn’t have a single, unified target (like "deliver a vaccine"), which complicates mission clarity.
Notable Quote:

“If this task force genuinely has the will of the Prime Minister...it can actually make those trade offs that are hard to make in a department.”
— Matt Clifford (6:25)

3. Buying British—Strategic Sovereignty vs. Value for Money

(8:17–10:29)

Procurement Debate:
Discussion on whether government procurement can and should favor British AI companies, especially given US (and increasingly, Chinese) national security moves.
"Buy British" Nuance:
Clifford advocates buying British only where true sovereignty is at risk, not for all goods (“I don’t care if we buy British stationery...but AI is different.”)
US Moves:
Increased US controls on AI exports make local capabilities more vital.

4. UK Dependence on Foreign AI Firms (e.g., Palantir)

(10:29–16:00)

Palantir’s NHS Role:
Burnham and others have raised concerns about over-reliance on Palantir—a US giant—in NHS data work.
Clifford’s View:
While Palantir operates under UK law and isn’t currently a sovereignty threat, having local competitors is important for value capture, jobs, and strategic autonomy—but “picking winners” top down often fails in software.
Root Problem:
UK founders/lack of scale-up capital: British tech firms often have to turn to the US for later-stage funding and end up moving overseas.
Pensions:
UK pensions still don’t invest enough in high-risk, high-innovation assets, unlike US funds—a persistent, systemic barrier.
Notable Quote:

“That’s the biggest reason that you don’t have a UK Palantir: probably the UK Palantir ends up moving to the US to raise the capital they need to scale.”
— Matt Clifford (15:40)

5. Understanding Sovereignty in the AI Era

(16:00–19:45)

Three Types of Sovereignty (Clifford):
- Value Capture: Are UK companies capturing jobs/tax from AI growth?
- Control of Critical Inputs: Could the UK be cut off from key AI models or compute (similar to energy shocks post-Ukraine invasion)?
- Influence on Global Governance: Does the UK have a "seat at the table" for setting AI rules/values (citing US export controls as a warning)?
Historical Parallel:
Sudden cutoffs (like Russian energy to Europe) can devastate economies not prepared for self-reliance.

6. AI Infrastructure & Data Centers Challenge

(19:45–23:37)

Does the UK Need Its Own Data Centers? Clifford strongly supports having local, sovereign AI compute resources, drawing a direct parallel to energy sovereignty post-Ukraine war.
Barriers:
- UK's high energy costs: Running a top-tier data center can cost £400m/year more in the UK than France.
- Grid connection delays: Investors are told to expect connections in “2039 onwards,” which is “forever in AI years.”
Potential Solution:
Local value-sharing deals: Projects could offer community investments or job programs in exchange for expedited grid connections.
Notable Quote:

“The sites where it’s viable in the UK are those that have existing grid connections...otherwise, you’re talking about planning for 2039.”
— Matt Clifford (21:30)

7. Providing Early Stage Tech Funding: The ARIA Model

(23:37–31:47)

What is ARIA?
Advanced Research and Invention Agency—£100s of millions for deep, long-term, high-risk research (modelled after US DARPA).
“Freedom to Fail”:
Built into ARIA’s mandate to encourage ambitious bets and acknowledge that many will fail, but at least one success can pay immense dividends.
Media Perception:
Clifford discusses efforts to ensure transparency and educate both public and press about why ARIA investments may seem odd or risky.
Ethics:
All projects have ethical oversight—recent high-profile example: research on “refreezing Arctic ice” and how careful stakeholder engagement improved the program.

Memorable Dialogue:

“Freedom to fail is earned. It’s not something that can be granted.”
— Matt Clifford (27:53)

8. Who Captures the Value of Breakthroughs?

(33:20–35:56)

Public Recognition & Returns:
Referencing Mariana Mazzucato, Peston asks if the UK public sector gets enough financial return for breakthroughs it helps enable.
University Spinouts:
- US universities take smaller equity, counting on “giving back” philanthropy, which encourages more entrepreneurship.
- UK universities take more equity but lack that donation culture; Clifford suggests moving toward the US (MIT/Stanford) model for a virtuous cycle.

9. The UK Dynamism Fund – Building a Pro-Risk Culture

(35:56–38:27)

Diagnosing Stagnation:
Twenty years of slow growth make this the “single biggest issue” facing the UK. The Dynamism Fund aims to support risk-taking, pro-entrepreneurial projects and campaigns to “tell a different story about the UK”—and encourage regional growth and dynamism.
Culture Shift Needed:
Clifford notes the UK frequently privileges voices of caution over those for change and wealth creation.

10. Andy Burnham & the Growth Mandate

(38:27–39:56)

Does Burnham “get it”?
Clifford is cautiously optimistic: Burnham emphasizes “good growth” and recognizes regional inequality and the need for productivity in second and third-tier cities.
Measure of Success:
“Proof will be in the pudding”—actual delivery and willingness to prioritize both innovation and regional dynamism.

Notable Quotes & Moments (with Timestamps)

On the urgency of AI policy:
“In AI years, two years is forever. So...the technology has advanced a huge amount, the politics has changed a lot, the geopolitics has changed a lot.”
— Matt Clifford (5:10)
On procurement for sovereignty:
“We don’t need to buy British on every good...but AI is different. Having powerful British AI companies is very important.”
— Matt Clifford (9:20)
On UK scale-up pains:
“The way to get British competitors is to make the UK a great place to start and scale businesses.”
— Matt Clifford (13:50)
On freedom to fail:
“If you only celebrate things that work, then you’ll get people optimizing to find things that work, even if they’re not very ambitious.”
— Matt Clifford (28:24)
On stagnation:
“If we’d had [this loss of output] in one go...people are 30 to 40% poorer than we would have been if we had not ceased to grow. And that’s the worst economic catastrophe in the country’s history.”
— Matt Clifford (36:47)

Timestamps for Key Segments

Opening & Introduction: 00:01–02:50
Dismantling DESIT & Government Strategy: 02:50–06:00
AI Task Force Structure & Powers: 06:00–08:20
Sovereignty and Procurement Debate: 08:20–10:29
Palantir, UK Tech Funding & Scale-Ups: 10:29–19:45
AI Infrastructure Challenges: 19:45–23:37
ARIA & Long-term, High-risk R&D Funding: 23:37–31:47
IP, Universities & Public Value: 33:20–35:56
UK Dynamism Fund & Growth: 35:56–38:27
Does Andy Burnham Get It?: 38:27–39:56
Closing Statements: 39:56–40:12

Overall Tone

Candid, Analytical, Concerned, But Ultimately Hopeful:
Clifford is frank about the UK’s challenges—slow growth, culture of caution, capital flows to the US—but remains optimistic that correct policies and renewed strategic focus can help the UK retain a leading role in AI and tech innovation.
Challenging Government, Not Just Celebrating:
Both hosts and guest push for concrete action and warn against complacency, especially on tech policy, infrastructure, and culture.

Summary Table: Key Challenges & Opportunities

| Challenge | Opportunity / Solution | |---------------------------------------------|------------------------------------------------| | Slow government coordination on AI | Empowered, cross-departmental AI Task Force | | Lack of scale-up capital | Pension fund reform; pro-growth policy | | Energy/infra barriers for data centers | Political deals, value-sharing with locals | | Overreliance on foreign (US) tech firms | Nurture a supportive VC & ecosystem culture | | Public discomfort with risk/failure | Transparent, ambitious public R&D (ARIA) | | Stagnation and regional inequality | Reignite risk-taking, focus on secondary cities|

Takeaway

The UK must prioritize bold, proactive policies to maintain tech and economic sovereignty in AI; break free from risk aversion; reform funding bottlenecks; and ensure that innovation spreads beyond London. Only through ambition, better infrastructure, and a willingness to accept (and learn from) failure can Britain reclaim growth and global influence in the AI age.

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Transcript52 lines

[00:01]
A
How important is it for us to have AI sovereignty? And what does that mean in reality? That's what we're talking about today. Do entrepreneurs feel less welcome in the UK now than they did a few years ago? Plus, does the government really understand that in order to create and support the next great British businesses, you need to lose some money along the way? So Matt Clifford is a British tech investor who co founded the startup program Entrepreneurs First. He is also a man with a lot of influence when it comes to UK AI policy, having advised former Prime Minister Kia Starmer and one of the people to set up the first government body dedicated to AI safety. So he's a man who knows a lot about what's going on in the AI world. This episode is brought to you by Octopus Energy. Greg Jackson, the CEO, is with us now. So Greg, I've got a question for you. Is it true that by 2040 in China there will be no petrol stations because everyone will be driving electric cars?
[01:01]
B
Yeah.
[01:02]
C
Crazy as it seems the Chinese state oil company, the one in charge of its petrol stations, is planning on having none by 2040. If you visit China today, what's really striking is the roads are quiet. I mean, all of the two wheeled vehicles that used to pump out pollution and noise are now electric. Pretty much all the taxis, buses, increasingly more than half the private cars that are sold in narrow electric. And even this year so far, 25% of their trucks are electric. So that electrification means that they're going to be less affected by global oil shocks and they won't have any petrol stations.
[01:41]
A
Greg, thank you very much. Now, on with today's episode.
[01:45]
C
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[01:46]
A
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[02:32]
C
ready to make anything online make sense.
[02:34]
A
There's no place like Chrome.
[02:35]
C
Check responses, Setup required.
[02:37]
A
Compatibility and availability various 18 plus.
[02:51]
D
Matt, really great to see you. And I really wanted to start with where we are now and in particular the dismantling of the Department for Science, Innovation and Technology. When it was first announced, I have to say I think both of us were a little bit anxious because we were worried that this meant that the new Prime Minister was downplaying technology and in particular the artificial intelligence agenda. What is your take on what is happening, why they have dismantled it, and whether we should be as anxious that we were as we were initially?
[03:33]
C
Yeah, I think, as you said, I was very concerned when rumors about the move started, but maybe if I start with some of the positives that have come out since and then almost talk a little bit about what I think the tech community would want to see, to feel that actually things were in a good place. So, you know, the good news is, I think, is although, you know, I think it is a real shame to see DESIT dismantled and I think its achievements in just three years are, I think, pretty extraordinary. You know, I think it is totally fair. As, you know, various people in the new government have pointed out that actually in some ways AI in particular is being elevated now. So, you know, we have for the first time the AI Minister attending Cabinet. We have an AI Task force in Cabinet Office jointly reporting to the Prime Minister and the Cabinet Secretary led by a senior civil servant who was doing the senior AI role in dcit. So in terms of the teams that were built in dcit, which I think were very, very high calibre, both from internal Whitehall talent and external experts, they're being maintained. They're being moved to different places, but they are being maintained. I think the question that people will still have is just what do we actually see now in terms of strategy and delivery? So I'm a little bit biased because I wrote the strategy for the previous Prime Minister, the AI Opportunities Action Plan. I think it's a good strategy. I think that said, I'd be the first to say it's two years since I started working on that. Lots has changed in AI in AI years. Two years is forever. And so I would like to see a recognition that actually in that time the technology has advanced a huge amount, the politics has changed a lot, the geopolitics has changed a lot. And so, if anything, I think we need to see more emphasis, more resource, more Prime Minister time on this topic. And really the proof will be in the pudding whether we get that.
[05:33]
A
Can I ask them? Because when this announcement came out about the new AI Task force, And as you rightly said, you know, it's got the AI Minister Kanishka, who we've had on the show and chaired by Patrick Valens, as who we've also had on the show as well. And within that announcement was this statement that for the first time AI will be positioned at the very center of government. So what is it that they're going to do now that they weren't doing before? Because surely like in the strategy you've you wrote for the previous Prime Minister and everything else, AI should have been at the center of that. So what's going to change?
[06:05]
C
I think one way to think about why this model could work and you know, probably if you were going to make the strongest case for the changes that the incoming government has made, you would say on areas of AI policy that were effectively entirely within decit's gift, it's performed really well. On areas of policy that are cross cutting and require coordination across departments, it's been much more challenging. And I say that with some scar tissue, having been in number 10 and found coordination with, there's a ton of planning implications of AI, there's a ton of energy implications of AI. These are things where operating as a department in the periphery is really hard and where if this task force genuinely has the will of the Prime Minister and the Cabinet Secretary, then it can actually, I hope, make some of the trade offs that are very hard to make in a department.
[06:58]
D
It seems to me these task forces are a brilliant innovation if they have a very clear set of goals. And in particular if they have one goal in particular. Could a task force like this be as powerful as the Vaccine task force?
[07:12]
C
Well, I would say there are both analogies and disanalogies, if that's a word there. The disanalogy, as you say, is there's not this one clear thing. I think you could create a one clear thing. It could be we would like to see an extra 5 gigawatts of domestic AI compute capacity built in this country by 2030. That would be a very different task force, I think, from the one that's planned where the analogies are helpful, I think, and it's huge credit to Kate Bingham and her team in the Vaccine Task Force that they were able to make a success of this. The ability they had to cut through interdepartmental disputes, go straight to the PM and get a decision. Their ability to procure things differently using different rules from the way we might normally do procurements, their ability to hire differently, these sort of capabilities, these freedoms I think we've seen, first with the Vaccine Task Force, then with the AI Security Institute in Desit, I think these freedoms actually do allow you to do things differently and faster. But as you say that, the thing that the government will have to decide now and be very clear on is what is the overriding goal of this task force?
[08:18]
A
Because on the point about procurement, I mean, we've had various people talk to us about how. How difficult it is and, you know, we're talking businesses in the air arena to who say it's really impossible to cut through the system and be taken seriously against the, you know, American businesses or these other businesses that are not putting money in the economy in the uk. So do you think that is genuinely going to change, then?
[08:44]
C
It's very hard to know. Again, to Robert's point, I think until it's very clear exactly what the overriding goal of the task force is, it'll be hard to say. I have seen encouraging things in the last few days, not least from the new Chancellor, John Healy, talking about procurement and putting more emphasis on the broader benefits of, of buying British. Now, I have to say there's a part of this that may not be a good thing. I don't think we need to buy British on every good. That's probably a way to spend too much money, get poor value for money and actually end up in a worse place for the taxpayer. Where I think there is a case for buying British is in areas where sovereignty is actually of huge strategic importance to the uk. So, actually, the truth is that if we're buying, maybe I'm going to make some enemies saying this. If, you know, if we're buying stationary, I don't care whether we buy British or not. I don't think it's a huge strategic asset to have powerful British paper companies. However, I think it's very clear that we're now operating in a geopolitical environment where having valuable and powerful British AI companies is very important. We've seen that very clearly in recent weeks and months as the US administration has started to see AI much more as a national security issue, willing to export control the most powerful AI models. And I think you start to see, well, there probably is a case, even if it's not the model layer, the chords, the chatgpts, where we would want to see, we want great British chip companies, we want great British drone companies, robotics companies, and actually using the procurement power of government to support those companies if they're good, is a really powerful lever.
[10:29]
D
I went in to see Palantir recently and was really actually impressed with the power of what they offer the British public sector. But we've already heard from Andy Burnham and people close to him that he is one of those politicians who is anxious about the extent to which Palantir is deployed through the NHS and other public services. So I suppose I'm interested in whether you thinking. Whether you think that the British government is right to be anxious about overdependence on one American company, Palantir, when it comes to, for example, being able to process NHS data, for example, in a much more streamlined way. And if they're right to be anxious, how. What is the best way to reduce UK dependence on a company like Palantir? Are there rivals out there that are British that might be in a position to offer something as effective as Palantir within the near future? If there isn't, how could a British government encourage the development of a British equivalent?
[11:56]
C
So, yeah, I think this is really important because it touches on, I think one of the big confusions in the debate about sovereignty, which is that when we say sovereignty, we often mean one of four or five different things. The sort of thing you're talking about is, do we have control over our data? Could we get it out if we needed to? Is the data processed under our laws and under our norms? Actually, my view, which may not be a very popular one, is that on this level, things like Palantir are not really a threat to British sovereignty. Actually, Palantir holds and processes data under our Lords, our laws. Sorry. There might well be people that would like to see a British company doing that, but ultimately, I don't think there's a significant risk to the UK's ability to operate, because actually, the software that's being run is being run here. It's been run kind of locally and we have a lot of control over that.
[12:53]
D
So, obviously, I understand your point about sovereignty, but even on your own set of concerns, surely it matters that one company, an American company, Palantir, has this effect of monopoly on joining out incredibly important data within the British public sector. This is a hugely valuable business. Why should it all go to an American? Why should all the profit go to an American company?
[13:19]
C
Well, so I think there's two ways of thinking about this, which is, is there something. Supposing we decided it was really important to have a UK version of Palantir, and again, I'm not. Not totally convinced that's where I would place my chips. But let's say that we did decide that. I worry quite a lot about solutions to technological sovereignty that are very top down, government led, picking a winner. I think the track record of that working is very poor. For decades, various parts of Europe have tried to do this with things like search engines with basically zero success. Now there are some people that would say, look, we got Airbus. Airbus was effectively a top down thing. I just think there are so many differences between that kind of top down engineering project and software. But I think what we could do and what I do worry about a lot and what I hope this government understands is that the way to get, not just in what Palantir does, but in any part of the technological supply chain, the way to get British competitors is to make the UK a great place to start and scale businesses. Now, in some ways it is, as you may know, I spent most of the last 15 years building and funding and helping people build technology companies and the UK is a great place to start companies. But there are real risks. We've spent a long time as a tech community in this country building an ecosystem that founders, entrepreneurs, want to be. I would point to two things that could put that at risk. One is that I think a lot of the rhetoric over the last few years around tax in particular, but really more of a sort of mood music about are people who are building businesses people that we want to have here? Are they people that we value, admire, want to build up that I think has gone in the wrong direction. And actually a lot of entrepreneurs sadly have left the country feeling that they're not welcome here. And that's a problem. There's a second problem which is well known and I think you've talked about on the show before, which is we do still lack scale up capital relative to the US and so there is still a problem that British founders get to a certain scale in the uk, raise capital in the US and end up moving there. For me, a lot of that is downstream of our pension system. Our pensions still don't invest enough in private assets, in risk assets, relative to their US peers. Successive governments have talked the talk on this, but we yet see a real difference. And I think if we can't make that change happen, that's the biggest reason that you don't have a UK Palantir, is that probably the UK Palantir ends up moving to the US to raise the capital they need to scale.
[16:00]
A
So can I ask, because we talk to entrepreneurs a lot and you know, sometimes they're saying they don't feel like, you know, welcome in the uk. There's not the finance in there. Or the support that they need to keep them there? Do you think that's fair? That they're not as welcome here as they once were?
[16:16]
C
So when it comes to I think there are three kinds of sovereignty that I do think we should worry about. The first is value capture. Do we have the companies, the AI companies in the UK that mean we're capturing value here, generating jobs and tax receipts here? That's key. The second is about do we control critical inputs to our economy? As the economy becomes more and more driven by AI, are we protected against other countries deciding to shut off access to key inputs? If not, then we could find ourselves in a very difficult situation. And the third is as the global governance of this technology evolves, do we have a seat at the table? Do we have a right for our voice to be heard in making critical decisions about how this technology is developed and governed? We saw very recently over the last two months the US administration putting export controls on the most powerful AI models built by anthropic. And what that means is that in theory they said no non US citizen can use these models. So today maybe that's a pretty marginal thing. But you can imagine in a world where actually the economy is really dependent on powerful AI models, if a US administration decided to do that and we were cut off overnight, that could have really huge consequences for the British economy. So there's kind of sovereignty there of do we, do we control critical inputs to our economy? Maybe that sounds far fetched today, but to me the echoes of what happened in 2022 when suddenly because of the invasion of Ukraine, we ended up without access to the energy inputs that we expected. It was caused a huge economic crisis. Then the third kind, which is a bit different, is do we have a seat at the table? This is a technology where the governance of it is going to really matter. It's a technology where values are embedded in the technology, where we might want our own flavor of what kind of AI we get. And we're kind of used in the UK to having a seat at the table. We're on the UN Security Council, we're in the G7. One thing I would say repeatedly to ministers when I was working in government was if they were creating the AI Security Council today, it's not obvious that the UK would have a right to be on it by virtue of the companies that we have. So there's another kind of sovereignty which is how do we earn that seat at the table?
[18:35]
A
Matt, there's still a lot to get into on all of this AI. Policy stuff, but sit tight for a couple of minutes while we go through a quick break. This episode is brought to you by Accenture Now. When your advertising operations fall out of sync, campaigns slow down, insights get buried and opportunities get missed. That's why Spotify and Accenture are working together to reinvent the rhythm of ad sales using automation, analytics and smarter workflows to simplify campaign delivery and access better data data across the business. The result? Less time spent on operations, more time connecting brands with the moments and fandoms that matter most. To learn more, check out Accenture.com Spotify UK. Can I ask you, Matt, a bit about the. The kind of infrastructure side around AI? Because that's part of the problem is the speed at which we're not doing things in terms of data centers. And obviously that's a big deal up here in the Northeast because of what's happening potentially in Blythe and around Teesside. What does it take to get things built?
[19:46]
C
So first I would just say, because I think a lot of people say, like, why do we even need this? Why does it matter whether we have data centers in the uk? Can't we just, it's all electrons traveling very, very, very fast. Can't we just use data centers in the US and this, again, is a sovereignty question. There's a lot of people who said before the invasion of Ukraine, oh, you know, energy is just a commodity you buy on the open market. Who cares? And yet we saw in the UK in 2022 the cost of not having domestic, domestic production, of not having energy sovereignty in the uk. My worry is that we could enter an era in the UK where the same is true of AI. And so I think it's very important that we have AI infrastructure in our own borders that we control that operates under our laws, even if it's international companies that are building it and own it. I think that's really important. As you've pointed out there, Steph, it's not trivial to get these things built. In fact, it's really, really hard. Now, there's a number of issues. One is planning. Obviously, these are huge construction projects, but the biggest one by far is energy. There are at least two distinct problems in energy when it comes to building data centers in the uk. One is just cost. As you know, we have the highest wholesale electricity prices in Europe. If you were to compare running a frontier data center in the UK versus say in France, it would cost you £400 million a year more in electricity costs alone in the UK to run it Here. So that's significant even at the scale that we're talking about. And then the other energy issue is actually just our grid. So getting a grid connection takes a very, very long time. In this country, there is a huge queue to be added to the grid. I remember when I was writing the AI action plan for the government being pretty shocked when people who wanted to invest billions or even tens of billions of pounds in building AI infrastructure in the UK were telling me that they were being given dates for grid connection in 2039 onwards, which in AI years is forever.
[21:58]
A
Oh, my God.
[21:59]
C
And so it's a real challenge in an industry that right now is extremely geared on speed, speed to power. How quickly can you get a data center online? At the moment, we're not in a position to be competitive on that, really. The sites where it's viable in the UK are those that have existing grid connections ready to go. But that's when you get into, understandably, political wrangling on what the right use of that grid connection is.
[22:27]
A
So then how do you get past that?
[22:29]
C
This is where you get a lot of careful diplomacy and deal making. I mean, my view, my personal view would be the amount of capital that is at stake in these deals is so large that there are absolutely ways to create win wins. The size of the pie is very large. And so what I would like to see is for UK national and local government to explore ways to actually share that pie with stakeholders locally. So you can imagine a world where we say, yes, we will accelerate a grid connection on this site because we think it's strategically important for the uk if, for example, the people building it, the beneficiaries of it, put aside some share of the value of the project for local investment, for creating jobs and training and investment locally. I think the sizes of, of these projects big enough that it's very easy to do that. In theory, in a way, that's a win win. And so I think we need to be a bit more savvy about the politics of this and say, how do we actually make building this infrastructure a win for all the different parties who are involved?
[23:37]
D
You chair aria, which is this huge fund which provides funding for very, very early stage research into a whole range of really fascinating sort of technological and scientific areas, but most of which, you know, could well end up with a sort of serious commercial application. I suppose there's sort of a number of issues here. One of them is that I, I remember as somebody who has, you know, being immersed in, you know, essentially the pressures that are on government for decades. You know, as, as a journalist, you know, if I were in your position, I would be permanently terrified that at some point some Chancellor is going to look at what are really significant hundreds of millions of pounds going to Aria and just think, wow, they can't really prove that there are sort of short term returns for Britain from this. If I were in your position, I'd be terrified that at any particular moment some Chancellor looking to save some money and allocate it to a short term populist gimmick would just close you down. Do you lose sleep at night about this?
[25:12]
C
I'm so chronically tired, Robert, with two small boys, that I never lose sleep at night over anything. I mean, look, you're absolutely right. What a remarkable thing Parliament did in 2022 in agreeing in a cross party way. This was voted, every major party voted in favor of Aria to create something that very explicitly would not produce short term returns. And not only did Parliament know that at the time, it was actually baked into the legislation. One of the things it says in the ARIA act is that ARIA can't be shut down for 10 years. Obviously they could repeal that, but there was an understanding, a cross party understanding that, yes, actually, if you want to see the huge long term impacts of fundamental breakthroughs in science and technology, then patience is what's needed. Everyone at Aria, the board, the exec team, takes that, that responsibility extremely seriously. Both for Aria's own sake, but also we feel what an incredible thing to be entrusted with as a symbol of actually the country's ability to make these long term bets. And so, yeah, we obviously spend a lot of time making sure that we're delivering good value for money, for taxpayers in particular. The thing that we really focus on in every board meeting, every time I speak to the exec, this is what comes up is we say, look, if you're going to do stuff this early, if you're going to do stuff this ambitious, you're taking a lot of risks. We're meant to. It says that in the RA Act. So the key question is, do we get the reward for the risk? How do we measure that? We're not a venture capitalist. We don't invest money for an expectation of financial return. Well, the test I use personally, as I say, if I look at the whole portfolio of Aria's bets, do I believe that if any one of them paid off, if any one of them worked out, then it would have been good value for the taxpayer? And when I look at what we're doing, everything from Programmable plants to energy efficient compute for AI through to robot dexterity. I think the answer is yes. So yeah, it will be 10 years before we know whether it's worked. But I think that's really baked into the model and I think that's the spirit in which everyone from Parliament through to the team has entered into it.
[27:31]
A
So do you feel then that there is a freedom to fail? Because that's what, you know, the first time there is a, let's say a loss in this where one of the companies that's been backed by Aria doesn't work out and it hits the headlines and then everyone's going, what a waste of taxpayers money. But do you, you don't feel that pressure then that there is, you know, do you have freedom to fail?
[27:53]
C
Freedom to fail is, is, is earned. It's, it's not something that can be, that can be granted. You know, it says in the REA act that ARIA should take risk, but we know that the way we do that will determine whether or not Parliament, government, the public, the media think we're doing a good job. So I think there's two aspects of this. One is what is the story that we're telling to the outside world? And we've tried repeatedly over the last two and a half years that ARIA has been incorporated to, sorry, three and a half years since the. ARIA has been incorporated to, to constantly tell a story about ambition, about what the world looks like if these things pay off and to be as transparent as possible. I think sometimes ARIA has, because of the debate in Parliament back in 2022, people think of ARIA as opaque or trying to hide from scrutiny. If you actually go on the ARIA website, we publish more or less everything, every program, thesis, every, all our reasoning about why we think something's exciting and it's all there for people to read. We hope we earn trust through building in public. But the other thing about freedom to fail, and it's also something I've learned as an entrepreneur and as an investor, is it's also about your internal culture. What do you reward internally? What do you celebrate? Actually, if you only celebrate things that work, then you'll get people optimizing to find things that work, even if they're not very ambitious. And so we've worked really hard at ARIA to build a culture of ambition, to build a culture of optimism, one of obviously seriousness about the stewardship that's core to what we do. But ultimately saying, yeah, actually you can fail here as long as you're failing because you set your Sights so high. Not because you're doing stupid stuff off.
[29:47]
A
Yeah. But just on that though, you can, you know, decide a story that you want to tell the outside world, but the media can do a completely different one to the one you're telling.
[29:57]
C
Yeah. You know, one thing we've been really impressed by over the last year in particular is that for any organization like ARIA that's doing high risk, high reward research funding, there's always going to be a way to spin anything we do in a way that sounds preposterous. And for sure we've had our fair share of stories that are like that. Headline grabbing. Aria Wants to Dim the sun, which we don't want to do sort of headline. What's been really impressive is that actually when we've then gone back and engaged with journalists and said, do you want to come and see what we're actually doing? We've had, I think, really great engagement from really genuinely interested, truth seeking journalists that want to understand. So there was a fantastic piece in the Guardian, which had previously run some less friendly stories on Aria, but recently they did this piece on some of our work in thinking about ways to refreeze the Arctic ice in the Arctic. And they wrote this in depth piece and I just picked up beautifully the combination of, of earnestness, of ambition and of engagement with a very broad range of stakeholders and communities affected by this to really show like, look, we might get it wrong, it might not work, but we're really trying to do important things in a way that's careful and thoughtful.
[31:22]
A
Yeah. Because on that refreeze the Arctic thing, I mean, that's fascinating. I'd love to know more about that. Obviously what comes from it in a kind of, as a sensationalist view is it's geoengineering. This is us mucking about with, you know, biodiversity and everything else. So is that like, do you, is that the kind of thing you have to battle against? Is that what you mean when you're saying, you know, that this, ways that this is a scene that we then try and challenge.
[31:48]
C
Yeah. For any given program there's going to be a take on it that is more sensationalist and that's, that's that's kind of fine as long as, as long as, you know, people know that they can come and read about what we're actually trying to do, you know, on our, on our website. And look, I think no one at Aria resents scrutiny. I think it's actually really key. One of the things that we've baked into everything we do is actually looking at the ethics of each program. Each program kind of has ethical advisors. We build in. We have an ethics committee of the board that looks at all the programs. So I think it's absolutely right for when people are trying to do research on technological capabilities that would be extremely powerful to scrutinize that and say, how might this be misused? What are some of the unintended consequences? One thing we've tried to do at ARIA is bake that into the process before we do funding, such that we're aware of the risk that we're taking, but we're doing it in a responsible and a conscious way. Actually, I think the example we've just been talking about is a good example where actually, I'm sure there are people that. That don't think it's the right approach, but actually the very careful work the team's done to engage people that have a different point of view has actually led to an improvement in how we do the work and what we fund. And you would encourage readers to go read that long read in the Guardian about the work we're doing on refreezing. And I think you get a sense of the care that's gone into it when you read that.
[33:20]
D
Is there a sort of optimal way of deciding as and when this becomes a great success, a great commercial success, where the profits, where the value goes? And there are sort of two. Two questions here. We've had Mariana Matsukatu, the economist on the program, and, you know, one of her big arguments is that the public sector never gets the recognition in terms of essentially financial returns that it deserves for the enormous amount of work that it does to, in a sense, pave the way for these commercial breakthroughs. And then there is just a difference between the way, for example, American universities decide what share they're going to get and the share of profits that British universities get. Naturally, one of the things that's quite striking to me is if you look at British universities, actually, I think British universities are, some would say, slightly less generous to the entrepreneurs than American universities. Is there a right and wrong in this area?
[34:21]
C
There are different models. Personally, if we just zoom out and look at the question of the role of universities in this, I think that the US model, at least the data suggests, looks like a better way forward. So in general, US universities take less equity in spinouts from their. Their staff, their faculty, et cetera, and sort of rely on the founders of those companies making money and donating money back to the university. And that seems to have worked really well at places like MIT and Stanford, broadly, having kind of worked with university based entrepreneurs for the last 15 years, I would say that large equity stakes for universities do put off would be entrepreneurs for obvious, obvious reasons. Now, to be fair to British universities, we don't have that culture of giving back in the same way as the US universities do. And so I think it is hard for the universities to have kind of one without the other. But I would love us to get to an equilibrium where we were more like the MIT model, where we take less as universities on the way out, but alumni give more when they have the means to do so on the way back. I think that's a better equilibrium. I think it produces a better culture of entrepreneurship. It's a hard place to get to. I think it's one of the ways that government could play a coordinating role. But yeah, I don't think there's a clear cut answer, but I would love to see that as the direction of travel.
[35:57]
A
So, Matt, can I ask you about this UK Dynamism Fund and what it's all about? So you're advising on this, aren't you? So what is it and how do you decide what's dynamic or not? That's what I'm particularly interested in with it.
[36:11]
C
So the backdrop to this is something you'll both be extremely familiar with, which is that we're now entering close to 20 years of economic stagnation in the UK and the impact of that on the lives of the entire country is just deeply profound and I think underappreciated. Still, if we'd had the loss of output relative to the trend we were on before the financial crisis, if we'd had it in one go instead of as this slow stagnation since 2008, we're talking about a 30 to 40% loss of income for the country as a whole. People are 30 to 40% poorer than we would have been if we had not ceased to grow. And that's the worst economic catastrophe in the history of the country. And it'd be hard for the newspapers to publish that as the headline every day, but in a way they should. This is, is for me the single biggest issue. So the question is, how do you reverse that? I didn't create the UK Dynamism Fund. I've agreed to advise them because I think they're good people with the right motives. But more broadly, the thesis, the analysis they have is that we're suffering from a lack of dynamism, we're suffering from a lack of risk. Taking both at the individual level, but also at the corporate and investor level. We talked about pensions already. That's a great example of it. We don't celebrate in general business builders and wealth creators in this country in the way that we might do in the US we tend to worry a huge amount about the downsides to any given thing. We tend to privilege the voices of people who would be negatively affected by any change rather than those who would be positively affected. And so again, I'm not running the UK Dynamism Fund, but what I understand is that they want to fund a very broad based range of products, projects that change that, that tell a different story about the uk, that fund individuals to organize, take action, run campaigns, make content talking about this and also start to provide some counterexamples of extraordinary dynamism up and around the country. And I'm very excited about this. I think it's, to me the most important thing is that we reignite growth in this country. And the. I was very excited to see if I could help as they go about trying to do this.
[38:27]
D
And can I ask related to that, whether we're yet in a position to judge whether the new Prime Minister, Andy Burnham, gets this as what should be the overwhelming imperative of his government?
[38:43]
C
Well, I think it's very encouraging that he's talked a lot about growth in his first few days as Prime Minister. He's talked a lot about good growth. I understand why he's saying that at the moment, I take any growth. But yeah, I agree that good growth is better than whatever the alternative is. I think he has a really good point about the role of regional inequality in driving growth. Actually, it's true that we have had for a long time in this country a two tier economy where London is actually very rich and has been for a long time. And the rest of the country, including the part I'm from, Bradford in West Yorkshire, is not. And I think it's certainly true that if you try and break down where does the UK fall down relative to its international peers, the productivity of our medium sized cities, places like Manchester, as the Prime Minister has talked about a lot, and Bradford where I'm from, these are not as productive as second and third cities in other European US comparators. So I think if he can drive productivity in those places, that would be a huge win. And again, as I said right at the start about are we doing the right things on technology? The proof will be in the pudding and it will be. But I'm excited to see that he wants to Take a real crack at that.
[39:57]
A
Well, Matt, it will be very exciting to see what happens next, but thank you so much for your time chatting to us. And we're all going off now to read more about refreezing the Art Arctic.
[40:09]
C
Thanks, Steph. It's great to be here.
[40:13]
A
Well, that brings us to the end of that episode. But AI is obviously the thing every business and policymaker is talking about at the moment. So in the next episode, we're going to look at why Chinese AI needs to be taken more seriously. We've got Azima Zar just back from visiting AI labs in China, including Moonshot. We'll be looking at what it takes to win the AI race, if it matters that Chinese firms are banned from using American chips and whether an AI business can survive without energy generation capabilities. That's our interview with Azeem Azhar, the founder of the leading research platform Exponential View. We'll see you then. Bye bye.
[41:08]
B
Hello, this is Saul, David and Roger Morehouse from the Battleground Podcast. And we're here to tell you about an exciting new strand we're bringing out every Wednesday, the Big Picture.
[41:16]
C
Yeah, there's a lot going on in the world at the moment, as we know, Ukraine, which we cover every week, but also sort of wider developments as well. So we wanted to have a section where we did interviews with high ranking individuals, people who can illustrate and inform us of that wider world.
[41:29]
B
Yeah, we all get a fog of information and comment and we want to cut through that to give some real insight about the conflicts and geopolitics that are affecting our world today. And we've got a pretty stellar lineup to begin with, haven't we, Roger?
[41:40]
C
Yeah, I'm just prepping now for an interview with Radek Sikorski, the Polish foreign minister. Poland's very much a big strategic player now in Europe with the Ukraine war as well. So he'll be a fascinating interview. Who have you been speaking to, Saul?
[41:51]
B
Yeah, well, this morning I spoke to Al Khan, soldier turned politician who until recently was minister of armed forces, but resigned on a matter of principle because he felt the government wasn't committing enough money to keep Britain safe in the years and decades to come. And he had some really fascinating things to say. So do listen out for the Big Picture every Wednesday and also on Friday when we'll be covering the latest from the Ukraine war. And it's things are really hotting up there at the moment. To find out more, search for Battleground Wherever you get your podcast.

300. Does Burnham get AI?

300. Does Burnham get AI?

The Rest Is Money – Episode 300: "Does Burnham get AI?"

Episode Theme

Key Discussion Points & Insights

1. The Dismantling of the Department for Science, Innovation and Technology (DESIT)

2. The Role and Potential of the New AI Task Force

3. Buying British—Strategic Sovereignty vs. Value for Money

4. UK Dependence on Foreign AI Firms (e.g., Palantir)

5. Understanding Sovereignty in the AI Era

6. AI Infrastructure & Data Centers Challenge

7. Providing Early Stage Tech Funding: The ARIA Model

8. Who Captures the Value of Breakthroughs?

9. The UK Dynamism Fund – Building a Pro-Risk Culture

10. Andy Burnham & the Growth Mandate

Notable Quotes & Moments (with Timestamps)

Timestamps for Key Segments

Overall Tone

Summary Table: Key Challenges & Opportunities

Takeaway

The Rest Is Money – Episode 300: "Does Burnham get AI?"

Episode Theme

Key Discussion Points & Insights

1. The Dismantling of the Department for Science, Innovation and Technology (DESIT)

2. The Role and Potential of the New AI Task Force

3. Buying British—Strategic Sovereignty vs. Value for Money

4. UK Dependence on Foreign AI Firms (e.g., Palantir)

5. Understanding Sovereignty in the AI Era

6. AI Infrastructure & Data Centers Challenge

7. Providing Early Stage Tech Funding: The ARIA Model

8. Who Captures the Value of Breakthroughs?

9. The UK Dynamism Fund – Building a Pro-Risk Culture

10. Andy Burnham & the Growth Mandate

Notable Quotes & Moments (with Timestamps)

Timestamps for Key Segments

Overall Tone

Summary Table: Key Challenges & Opportunities

Takeaway