Leroy Hood, M.D., Ph.D., is one of America’s most successful and distinguished scientist-inventors. Four devices he created proved instrumental in decoding the human genome. He pioneered the important new field of systems biology, which studies complex biological linkages and uses technology and mathematics to map and explain interrelationships. He has been awarded seven of the highest prizes in experimental science, and a dozen and a half companies have been spun off of his research work. On January 31, 2013 he spoke with Philanthropy magazine in Washington, D.C., about the crucial importance of private giving in making his scientific successes possible.
Philanthropy: You’ve been involved on the for-profit side of biomedical research, and you’ve been involved in the nonprofit side. What do you consider the distinct advantages of working with nonprofit funders when you’re pursuing this research?
Leroy Hood: Why don’t I tell you a little bit about my history, because I've seen that question from at least three different vantage points?
I was a faculty member at Caltech for 22 years, starting in 1970, and there my major interests were developing new technologies. Among other things, we developed the automated DNA sequencer that made the human-genome project possible. We also did a good deal of molecular immunology, molecular biology. And I would say, at Caltech, philanthropy played a really catalytic and interesting role in a number of ways. Perhaps the most spectacular was in the development of the automated DNA sequencer itself.
Philanthropy: How so?
Leroy Hood: In the early 1980s when we conceptualized the instrument but were just getting ready to develop it, we put in a number of grants to the National Institutes of Health in Washington. They got some of the worst scores the NIH had ever given. People said what we wanted to do was impossible, or they said, “Why do this? Grad students can do it more easily.”
So what I did was fashion together a really interesting consortium of philanthropy and business. The philanthropy was Sol Price. After making a lot of money he had helped start the Weingart Foundation that he guided for many years. What was terrific about Sol Price was he was really smart and flexible, and excited by innovation and new ideas.
Philanthropy fuels new opportunities and opens up innovation in exciting ways.
So when the NIH funding didn’t work out for the automated sequencer, I went to Sol, and he ended up giving me I think it was $200,000 a year for two or three years. That was enough to get started. And then I went to a good friend at Monsanto and said, “Look, we’re going to develop an instrument that’s going to change how you do things. Would you be willing to put some money in to help it?” And Monsanto ended up putting in $200,000 a year. It was those two—the combination of philanthropy and industry—that really led to the conceptual and early-stage development of the automated sequencer. Had it not been for those things, progress would have been delayed for an unknown period of time.
Philanthropy: Was this Monsanto corporate philanthropic work?
Leroy Hood: No, no. I had a really good friend who was head of R&D at Monsanto and he said, “Look, we’ll put money into this with a guarantee that once you develop the instruments Monsanto will be one of the first companies to get it. I don’t think Monsanto had a lot of philanthropy in the early 1980s when this was happening. So it was corporate money that went into it, and it made all the difference in the world.
Then there was Braun Laboratories. At that time I was really interested in adding to the dimensionality of biology at Caltech. I pushed the idea that we should go into human biology, and we should get a specialized cancer center, which I did succeed in getting. We ended up persuading John Braun to give a building that later became an important center for collaborative science. A beautiful example of philanthropy encouraging innovation and creating new opportunities that didn’t exist before.
Philanthropy: I think of Caltech as a place that’s awash in money, especially since it’s a relatively small student body. I have to imagine that government funding, public funding, is readily available for Caltech. And yet it was philanthropy, you say, that really saw the opportunities you’ve outlined?
Leroy Hood: Look, I think at truly excellent places like MIT or Caltech or Harvard, new innovation almost always comes from philanthropy.
Philanthropy: That’s been your experience?
Leroy Hood: When you get federal grants and contracts they’re tied to very specific concrete things and you’re responsible for their execution. You don’t get federal grants and contracts in general to build new buildings and create new visions and do those kinds of things. It’s philanthropy that fuels these new opportunities and opens up innovation in exciting ways.
Philanthropy: It’s interesting that you point to “building new buildings” as part of that.
Leroy Hood: I point to the “building of new buildings” because they allow you to recruit the new people that are at the heart of intellectual change. I mean, a building is a place that creates opportunity for people to go there and do new kinds of work.
Philanthropy: Okay, well that gets you going at Caltech, where you come up with crucial inventions that are so indispensable to the human-genome work.
Leroy Hood: Actually there was also another invention that often doesn’t get mentioned, which we did in my second site at the University of Washington. It was a device that allowed you to make DNA arrays. That was another big technology for modern biology.
Toward the end at Caltech I really wanted to push in new directions. For example, at that time I was pressing hard for the human-genome project and most of the biologists at Caltech were against it. It was big science and hence bad. You were sequencing a genome that was mostly junk—that was the belief at that time, which turned out not to be true. I was thinking about creating a cross-disciplinary biology that was different from what they’d done there.
In 1992 I got the chance to do exactly what I wanted to, in this case thanks to Bill Gates. What I proposed was to create at the University of Washington Medical School the first ever cross-disciplinary department of biology. It was called Molecular Biotechnology. And Bill put in $12 million to enable its creation.
Philanthropy: Now had you approached Gates, or had Gates approached you? It sounds like there was just a mutual confluence of your interests.
Leroy Hood: There was. I had a student who was head of the Department of Immunology at the University of Washington and he knew I was unhappy at Caltech because I wanted to do science in a different way than most of the rest of the people wanted to, so he said, “Why don’t you come up and look around?” He explored a number of different possibilities and eventually they decided to approach Gates and say, “Look, this is something you might be interested in.”
This was before Gates had become so active in philanthropy. I actually think it was a pretty close thing, that he seriously considered not doing it. But in the end he did. And he made possible the creation of a department that was just marvelously successful.
Philanthropy: Was this the sort of thing where he seeded it and stepped back?
Leroy Hood: Yes, totally.
Philanthropy: Or did you continue your relationship?
Leroy Hood: No. What he said to me—I mean it was really interesting—he said, “Lee, I just want you to understand I am giving $12 million, but I’m in my acquisition phase, I’m not in my philanthropic phase, so don’t expect any more.” And I said, “that’s fine, all we need is the money to get started.” And that did start us.
And look where it ended up. Talking about the human-genome project and what automated DNA sequencing made possible, the Battelle Foundation recently estimated that the spin-off from the human-genome project is now in excess of $800 billion of value.
Philanthropy: And growing.
Leroy Hood: And growing. So the return on our comparatively modest investments was off the scale. And philanthropy played a crucial role in catalyzing the initial stages of that.
Then came the third stage. I was at the University of Washington for eight years. The department did really well and pioneered new technologies, a whole series of things. Increasingly what I was becoming interested in was this new approach to biology called Systems Biology, which is a holistic and global view of trying to attack complex problems. It became clear to me that I needed to create a new environment to pursue this; it just couldn’t be done at the University of Washington.
Philanthropy has a potential to be flexible: It’s money that can catalyze new ideas—that lets you push the frontiers.
Number one, I was really constrained in fundraising then. Basically the university president and dean said it’s all going to go through us, and they told me when I could ask anyone for money. I knew Bill Gates better perhaps than anyone else did at the University Washington, yet I was told I couldn’t ask him for things without permission. And the salaries of cross-disciplinary people that the university paid meant that you trained really good young people and then industry would whisk them off at double or triple their salary. A whole series of things like this just didn’t work out.
So in 2000 I started the Institute for Systems Biology, which is a nonprofit research institute dedicated to this new systems approach. Very quickly we applied it not only to biology but to medicine as well. I gave money, my own money, to help things get started. That ended up really making this possible.
Philanthropy: I would imagine that cutting-edge scientific research in biology has enormous startup costs.
Leroy Hood: It does.
Philanthropy: Just the creation of a research laboratory would be prohibitively expensive.
Leroy Hood: I would guess that getting the institute required us to generate about $30 million in the first two to three years, just to put in the infrastructure to get going. And again that was all philanthropy. And it catalyzed great things. Just to give you an idea, our institute recently was judged to be the fourth most successful of 3,200 research institutes in the world in terms of the impact of its papers. That’s a hint of what we’ve achieved in 12 years.
And I say that just to show how philanthropy can leverage new opportunities that are transformational. Systems Biology has now been mimicked in probably 70 or 80 different centers all around the world. When we started in 2000, many of my sophisticated friends thought it was hype. Their attitude was very much like the initial attitudes toward the human-genome project—there isn’t anything really there, this is a waste of time and a waste of money. That’s all changed dramatically in ten years.
Philanthropy: Let me spin out two questions. One, you said the institute was founded with about $30 million that all came from philanthropic sources. Would you have taken public funding? Would you have taken corporate R&D?
Leroy Hood: In a second. If they were available. But, interestingly, they never were available.
Federal funding has almost always focused on specific kind of projects. It isn’t focused on creating infrastructure—and it’s the infrastructure that’s so essential to making the house that really good people can work in. That was the point at Caltech with the Braun building. Suddenly we had 200,000 square feet into which we could bring all sorts of new people and things. And without that enabler we couldn’t have made that jump. And the institute was exactly the same way, the philanthropy really created the infrastructure that made it possible then to build something that’s going to be very lasting.
Philanthropy: It sounds to me like what you’re saying is that there is greater threshold for risk, there’s much more tolerance for new ventures, with philanthropy.
Leroy Hood: Exactly.
Philanthropy: Because it’s not constrained by various federal guidelines, it’s not constrained by the bottom-line corporate environment. But to the second question, are you now soliciting funds from other sources?
Leroy Hood: Oh yes.
Philanthropy: I mean do you take corporate R&D?
Leroy Hood: Oh my goodness, yes.
Philanthropy: I would imagine it’s much easier to pick up at this point now that it’s a proven model?
Leroy Hood: It’s easier to pick up than it was in the initial stages. And I’ll tell you, these days philanthropy has become hard, because philanthropy shuts down when the economy shuts down. If you’ve lost 30 percent of your portfolio, even if you have $2 billion, you don’t feel much like giving away to anybody.
One of the things that was difficult when I went out raising money in 2000 was it was just before the dot-com bust, so that made it rough for a while to get some of the donors interested. Bill Bowes has been one of our major philanthropists. Bill Gates has been a major philanthropist. They’ve all helped. But what I’ve always loved about philanthropy is it’s money that has a potential to be flexible. It’s money that can catalyze new ideas. It’s money that lets you push the frontiers, follow the leading edge. Hard to do that at the National Institutes of Health. Today, if you haven’t completed two thirds of your proposal, you’re probably not going to get a NIH grant because everything is so competitive and so conservative. So a philanthropist who is willing to say “Yes, I’ll step in and help you find something new” is a jewel.
Philanthropy: Is that attitude widespread among your colleagues? It seems to me that the gravitational pull is toward the NIH. Are you something of an outlier in terms of seeing this niche that private philanthropy can fill?
Leroy Hood: No, I would guess if you looked at the heads of the most non-profit research institutes all would agree philanthropy is really important—how effectively they can get it varies, obviously.
Charitable donations are enormous engines of new opportunities, of starting in directions that wouldn’t have been possible to fund by conventional sources.
Another important area for philanthropy: In biology there’s a battle now between what’s called “small science” and “big science” (which is the kind of thing we’ve developed at ISB—it’s cross disciplinary, it’s integrative, it’s systems-driven, milestone-driven). Big science can take on, in a beautifully integrated way, really challenging problems. “Small science,” on the other hand, is built on single investigators and the people they have around them working on a small part of a very particular problem.
My argument is that the two are enormously complementary to one another. They can really interact beautifully. But at NIH, I would say 80 or 90 percent of the people are “small science” partisans. So any time the financial situation gets tough there’s the cry, “Let’s get rid of all this big science and put all the grants into small science.” And I would say, “You need a balanced portfolio, because it’s only big science that can attack the most complex problems; small science unequivocally cannot do it.”
Our platform is that biology drives technology, which drives computation and mathematical tools, analytic tools. These tools then inform biology. This is kind of our holy mantra, and at each point in that circle enormously innovative things come out: new strategies, new technologies, new computational tools. As a result, the Institute for Systems Biology, in the 12 years we’ve been in existence, has been involved in creating 17 companies and probably raised $400 million worth of venture capital and other kinds of funds. That’s the kind of thing that a front-end investment by philanthropy can lead to.
Philanthropy: Has ISB ever partnered with venture capitalists to take some sort of ownership stake in one of the spinoff companies it helps create?
Leroy Hood: Yes, in one of the five companies we’ve had spin off directly from ISB. All five companies have been really successful. And one of them is a firm called the Accelerator, in which my vision was to partner with five venture-capital groups, to have each of them put $5 million in a fund that could be used to invest in early-stage startup science for one to three years, and then if it worked really well to convert the science into a company. The Accelerator has done that with 12 companies now, and eight of them are doing quite well. And ISB gets an equity position in each of the companies that comes out of that. If a few of those companies do really well, in another ten years or so that’s an endowment for the future. The thing that’s a little tricky with companies is what happens to the equity as you go through subsequent rounds of funding; you have to be a little cautious about protecting your initial position. But having said that, we’re in 17 different companies now, and if any one or two of them does really well we’ll do okay.
Philanthropy: You’ve alluded to the prolonged economic downturn and also some of the policy issues behind charitable giving. I’d be curious to hear your thoughts on the state of play with American charitable giving, how you see it affecting funding for biomedical research in the future, some of the threats, some of the opportunities that are out there. What does the five- to ten-year horizon look like to somebody who’s been wading in these waters for quite a while?
Leroy Hood: I think the big challenge is, “Are charitable deductions going to remain?” I think we have to do everything we can to ensure that they are going to remain. My feeling is that when used right, charitable donations are enormous engines of new opportunities, of innovation, of starting in directions that wouldn’t have been possible to fund by conventional sources, of taking the chance on interesting people that may not otherwise get backed.
I remember Sol Price, the philanthropist who helped with the DNA sequencer. He was a hard-nosed, critical guy who asked tough questions. But when he was done, he was satisfied, and he more or less gave me a blank check to spend as I felt I needed. And that was just enormously valuable. One more example of revolutions and transformations you can trace directly to philanthropy.
I mean you can’t say genomics only depended on the DNA sequencer, nor in fairness could you say that the sequencer was only supported by philanthropy. But it was a critical catalytic moment and philanthropy was there to push it forward. That’s exactly what philanthropy should be doing, opening up new areas and new opportunities.
What I hope with the modern philanthropists who are very technology oriented, I hope they don’t swing over to the side of thinking they know what needs to be done all the time. I hope they always leave a little room to fund somebody who comes out of left field with a wild idea they’d never thought about, and not have it all programmed.
Philanthropy: Well, great philanthropists style themselves as society’s risk capital. They have the resources to put big bets on unconventional ideas, heterodox thinkers, and if it doesn’t pan out nobody’s lost anything but the giver, it doesn’t cost the taxpayer a dime, and a private company doesn’t have to suffer.
Leroy Hood: I think the other argument that’s really compelling is the diversity of societal support that donors offer. Giving to the homeless, to the arts, to higher education. A wide diversity of things that make society better, in ways that government doesn’t always do very effectively.
I subscribe completely to that point of view. I’m a bit myopic due to the fact that I’ve lived science. I can tell you about philanthropy’s importance there. I can’t tell you about the other sectors, but I’m sure every one of those other things has similarly marvelous stories to be told.