I know it's not a popular topic around here, but I'm confused that corporate taxes are not mentioned at all. Wasn't one major incentive for creating research labs that such investments in R&D were tax deductible, and the drastic lowering of these taxes since the 80s made that point moot?
The death of corporate research labs
61–70 of 256 posts
Re: The death of corporate research labs
#62I've only got one speed; sorry. Compare this to interest rate policy. This article mentions a lot of research labs shutting down in the 90s. The 90s was also when the current 30 year period of Any company that invested heavily in the future would have been a loser vs. people who worked on credit. It isn't surprising that none of the big corporations are investing in research. The investment framework levers have been…
The lower the discount rate is, the more the long term matters.
Re: The death of corporate research labs
#63Earlier quoted context omitted.
Just about everything in the article doesn’t pass a sniff test to me. Aside from the issue you mentioned, the article seems to be making the claim that we have less innovation today. Which just seems like a ridiculous claim to me. It also mentions “pervasive short-termism” as an obstacle. It might be in large public companies, but it’s certainly not in the private equity markets. Innovative companies have access to h…
> the article seems to be making the claim that we have less innovation today. Which just seems like a ridiculous claim to me. looking at econonmic growth it's extremely hard to deny. The years ca. 1945-1975 constitute an exceptional period in innovation far surpassing anything today, both qualitatively as well as quantitavely. (new marginal innovations in tech or pharmaceuticals today tend to be about 10-50x more ex…
It's not surprising that the period that covers the invention of transistors, integrated circuits and microprocessors saw significant technological leaps. You can make the same observations about the periods when steam, gas and electric power came to market.
What you're describing though is a small number of companies making significant technological leaps, not the quantity of innovation. People also argue that the invention of the internet, and the subsequent global proliferation high speed internet represents the same sort of revolutionary leap forward (one that we're going through right now).
Re: The death of corporate research labs
#64Bell Labs and Xerox PARC are the poster children for successful corporate R&D labs, but I wonder if, to some extent, they were in the right place at the right time? The advent of modern computing and digital telephony provided rich soil for impactful research. I worked for a large R&D lab a while back after completing my PhD, but the organization turned out to be completely directionless. Funding went to snake-oil sa…
> Bell Labs and Xerox PARC are the poster children for successful corporate R&D labs, but I wonder if, to some extent, they were in the right place at the right time? The dawn of modern computing and digital telephony provided rich soil for impactful research. I think this is part of it. But als,o there were just so few companies who were doing serious R&D for technology. Breakthroughs were new and unique. These days…
Yes there are two things that drive innovation, competition and new technology/timing.
Many of these companies that have beneficial monopolies/oligopolies for a while they know if they don't innovate others still will even if there are no major competitors at that time. They know timing/technology capability, hardware, software, design or other are at a point where they must progress.
Amazon is a great example of this with how much they reinvest in research and development. It would hard for another non engineering/product innovation company to compete. Right now the Amazon market leading position is beneficial, in some cases they over step, but mostly it is beneficial. Google might be another. Both have flashes of abusing their position but mostly they are still innovating and pushing forward. These companies also inspire small startups to make products that are extended research and development divisions and select the best outcomes. While some acquisitions are bad, mostly the fact that being purchased by one of the larger companies shows they are into R&D and it leads to more of it.
ISPs and banks for instance are two areas where they are stifling innovation, growth and ISPs in particular our network suffers due to this monopoly/oligopoly grip they have on this needed utility.
Bell Labs was back in a time also that had more engineer/product/creative people with leadership roles and the ability to influence the power structures. So direction has changed quite a bit with that. R&D is very hard to justify to the value extractors even if the value creation is clear or maybe isn't as obvious yet.
The mere fear of missing out on technology/timing and potential competitors is the only thing that drives innovation at all. Once monopolies/oligopolies start to use their power position for holding others back by stifling competition rather than them moving forward and using their power position as a booster for product/innovation value creation, that is when anti-trust is needed.
Microsoft for instance in the 90s started to abuse their position, so the anti-trust started. What the world got out of that was Apple resurgence (even got a loan from Microsoft at zero hour of $100 million to stay afloat), Google, Amazon, etc. It even turned out good for Microsoft as they are a much better company today, recognizing innovation over limiting competition is the way forward.
Without the mere fear of being broken up, Microsoft slowed.
With the anti-trust case, it slowed them down just enough to allow competition to get closer.
Anti-trust is the blue shell in Mario Kart.
Anti-trust blue shell is very much needed if the main player gets too far ahead and abusing their position, that game is no fun. Anti-trust is the rubber band AI system that keeps the game competitive [1].
Additionally, monopoly/oligopoly are bad when the value creators (engineering, product, creative) lose power to the value extractors (business, finance, marketing) in a company.
It really isn't the fault of value extractors to extract the most value from the created value, but if there is no competition or balance between creation/extraction, that leads to stagnation on value creation and eventually more power plays that abuse market leading positions to stifle competitors. Ultimately we all lose when that state is entered.
Here's a great quick point by Steve Jobs about product stagnation and the managers/business side and how they can run amok if not controlled to allow value creation to continue, and how monopolies or problems that arise when only the business/managers are in charge. [1]
> It turns out the same thing can happen in technology companies that get monopolies, like IBM or Xerox. If you were a product person at IBM or Xerox, so you make a better copier or computer. So what? When you have monopoly market share, the company's not any more successful.
> So the people that can make the company more successful are sales and marketing people, and they end up running the companies. And the product people get driven out of the decision making forums, and the companies forget what it means to make great products. The product sensibility and the product genius that brought them to that monopolistic position gets rotted out by people running these companies that have no conception of a good product versus a bad product.
> They have no conception of the craftsmanship that's required to take a good idea and turn it into a good product. And they really have no feeling in their hearts, usually, about wanting to really help the customers.
Market leaders should always fear the anti-trust blue shell, when that fear is gone the game is not competitive and we all lose.
[1] https://www.giantbomb.com/rubber-band-ai/3015-35/
[2] https://www.businessinsider.com/steve-jobs-on-why-innovation...
Re: The death of corporate research labs
#65Holdup. Lack of anti-trust enforcement is blamed (among other things) for the end of corporate R&D, but Monopoly breakup is exactly what killed Bell labs! 9 smaller companies weren't going to fund their own lab, and the only reason the lab existed was to find new markets to explore. In fact, nearly all of the examples of successful R&D labs came from corporations that so dominated their industry they put money into f…
I used to think monopolies were inherently progress limiting, but as you point out it's a mixed bag. Bell labs was an amazing center of innovation even as AT&T stifled the telephone market. Not sure corporate labs could exist today with the self-defeating (and legally incorrect notion) that the primary duty of a public company is to make money for shareholders. That philosophy today would/will prevent large companies…
[deleted]
Re: The death of corporate research labs
#66Earlier quoted context omitted.
> the article seems to be making the claim that we have less innovation today. Which just seems like a ridiculous claim to me. looking at econonmic growth it's extremely hard to deny. The years ca. 1945-1975 constitute an exceptional period in innovation far surpassing anything today, both qualitatively as well as quantitavely. (new marginal innovations in tech or pharmaceuticals today tend to be about 10-50x more ex…
It's not surprising that the period that covers the invention of transistors, integrated circuits and microprocessors saw significant technological leaps. You can make the same observations about the periods when steam, gas and electric power came to market. What you're describing though is a small number of companies making significant technological leaps, not the quantity of innovation. People also argue that the i…
people argue that but it's not anywhere in the numbers (and even more importantly, in lived experience). The argument can be made that this innovation just lags the invention of the internet but that's kind of unfalsifiable and looks increasingly like rationalisation.
One key difference is that inventions like the microprocessor or the steam engine are deeply fundamental. They're at the 'backend' of the chain. Internet based digital services are at the consumer end. Which has produced some growth, but could be argued to mostly fuel hedonistic consumption. (It's hard to figure out what deep growth watching hours of tiktok creates)
In his book Gordon points to the thought experiment of going to sleep in 1870 and waking up in 1970 in NY. You'd be in an entirely transformed world. Cars, buildings reaching into the sky everywhere, electrified subway stations, computers, drugs that save countless of millions of lives, modern agriculture and so forth. Go to sleep in 1970 and wake up in 2020 and what's changed, other than people staring at tiny screens?
Re: The death of corporate research labs
#67I have a different take on this: corporate research labs died because we aggressively clamped down on monopolies. When you don't have a monopoly, the investor mindset is that the company should be laser-focused on "core competencies" (buzzword, but important) and return excess capital to shareholders - who then provide it to other companies that will innovate in the field. Keep in mind, the universe of alternative in…
I half with you - when you have a money printing machine (a monopoly), it's easier to justify spending money on R+D.
But at the same time, we've seen a decline in corporate R+D since the start of the neoliberal era - the article mentions that this started at around Nixon's time. This is the period of time where Milton Friedman's ideas started to gain widespread acceptance:
>“there is one and only one social responsibility of business– to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game,”
Many organisations have taken the idea of "profits over everything", and interpreted it as "quarterly profits over everything". R+D labs don't result in quarterly profits. Much of the research ends up being profitable years down the track. So corporate R+D is killed off.
Re: The death of corporate research labs
#68Earlier quoted context omitted.
Just about everything in the article doesn’t pass a sniff test to me. Aside from the issue you mentioned, the article seems to be making the claim that we have less innovation today. Which just seems like a ridiculous claim to me. It also mentions “pervasive short-termism” as an obstacle. It might be in large public companies, but it’s certainly not in the private equity markets. Innovative companies have access to h…
> the article seems to be making the claim that we have less innovation today. Which just seems like a ridiculous claim to me. looking at econonmic growth it's extremely hard to deny. The years ca. 1945-1975 constitute an exceptional period in innovation far surpassing anything today, both qualitatively as well as quantitavely. (new marginal innovations in tech or pharmaceuticals today tend to be about 10-50x more ex…
In the enlightenment you could make discoveries about lightning with a kite and a key, in your free time when you weren't working as a publisher or founding America.
In 2020 you need 10,000 scientists and $9bn to build a hadron collider, and 99.9% of people won't even understand if your result is important or not.
Are we less good at science now, given that we're spending far more resources for far less impact? Or rather, are we better, but the lowest hanging and juiciest fruit got picked first?
Re: The death of corporate research labs
#69Holdup. Lack of anti-trust enforcement is blamed (among other things) for the end of corporate R&D, but Monopoly breakup is exactly what killed Bell labs! 9 smaller companies weren't going to fund their own lab, and the only reason the lab existed was to find new markets to explore. In fact, nearly all of the examples of successful R&D labs came from corporations that so dominated their industry they put money into f…
It's not being too large that forced a split up but their anti-competitive practices and positions. The regional bells still were big enough to run their own research labs. Imagine if Alphabet was broken up, Google search can still afford to run a research lab, as can youtube. The problem I think is how easy it is for large companies to acquire smaller companies. It's how they expand or enter a market, they refuse to…
Increasingly they don't even buy small companies. They just copy. Look at half of Microsoft recent activity.
Re: The death of corporate research labs
#70Bell Labs and Xerox PARC are the poster children for successful corporate R&D labs, but I wonder if, to some extent, they were in the right place at the right time? The advent of modern computing and digital telephony provided rich soil for impactful research. I worked for a large R&D lab a while back after completing my PhD, but the organization turned out to be completely directionless. Funding went to snake-oil sa…
I too worked in an R&D lab after my PhD. Which projects to fund was always a problem. No-one knows which projects are going to succeed. Do you stick with a group that has been making steady progress for 5 years or switch to something else that sounds more revolutionary?
Under different leaders my lab flip-flopped from "blue sky, do what interests you" phases to "we need to focus on value" phases.
Neither produced anything revolutionary. But the blue skies phases did produce some useful work.
Research is a risk. Funding it is like gambling. Don't bet more than you are prepared to lose.