[HN Gopher] The Death of Corporate Research Labs
___________________________________________________________________
The Death of Corporate Research Labs
Author : banjo_milkman
Score : 143 points
Date : 2020-08-18 16:33 UTC (6 hours ago)
(HTM) web link (blog.dshr.org)
(TXT) w3m dump (blog.dshr.org)
| the-dude wrote:
| Previously : https://news.ycombinator.com/item?id=23246672
| Sniffnoy wrote:
| Non-mobile link: https://blog.dshr.org/2020/05/the-death-of-
| corporate-researc...
| mobilefriendly wrote:
| It is pretty strange to blame the "more relaxed antitrust
| environment in the 1980s" when it was the 1982 anti-trust breakup
| of Ma Bell that destroyed Bell Labs and ended the monopoly profit
| flows that subsidized the telecom labs.
| mrosett wrote:
| That was my reaction as well. Also, a lot of the most
| interesting corporate research these days is done by quasi-
| monopolies like Facebook and Google.
| chillacy wrote:
| I believe Peter Thiel made a similar point when he said that
| monopolies (or at least, profit margins beyond sustenance)
| give companies breathing space to fund these types of things.
| Reimersholme wrote:
| "Monopolists can afford to think about things other than
| making money; non-monopolists can't. In perfect
| competition, a business is so focused on today's margins
| that it can't possibly plan for a long-term future. Only
| one thing can allow a business to transcend the daily brute
| struggle for survival: monopoly profits."
| Merrill wrote:
| The Bell System, IBM and Xerox, which all had corporate
| research labs were all monopolies in effect - the Bell System
| by regulation and the '56 Consent Decree, IBM by overwhelming
| market dominance, and Xerox by patent protections. This gave
| all three corporations excess monopoly profits, some of which
| could be devoted to research. Although the antitrust suit
| against IBM was settled, it did modify IBM's behavior and it
| ultimately failed to compete well with mini and microcomputer
| companies. In Xerox case, the expiration of patents allowed
| competitors into the market.
|
| Without a monopoly a corporation will find it very difficult to
| justify research that can be used by other businesses.
|
| The transistor was a disaster for the Bell System. It was not
| particularly useful in the telephony system of the day, which
| used high voltages in tube transmission equipment and high,
| intermittent currents in electromagnetic switching equipment.
| On the other hand, the 1956 Consent Decree forced the Bell
| System out of other businesses (audio, computer, consumer
| electronics, etc.) and out of other countries (Canada,
| Caribbean). So the Bell System could not use it's new
| transistor to expand in the businesses where it fit, and having
| a fundamental patent on it exposed the Bell System to great
| anti-trust scrutiny and greater regulatory duress, such as the
| FCC Computer Inquiries.
| iorrus wrote:
| That was always my default assumption but the argument in this
| article also seems logical.
| mobilefriendly wrote:
| Yeah another thing that happened in 1981 was Congress created
| the first R & D tax credit. I wonder if that impacted the
| structure of labs-- it definitely has increased net research
| spending but has a lot of rules.
| hooande wrote:
| His point was that it's cheaper for big companies to innovate
| by buying startups than it is for them to do that research and
| testing in house
| marcosdumay wrote:
| Yes, and that's the mainstream argument.
|
| Yet, Bell Labs weren't the only corporate research lab. And on
| the big picture, they did disappear at the time that merges
| become common and most markets turned into monopolies.
|
| This article has a very good argument for why only the market
| leaders would invest on those labs, and yet they are caused by
| the enforcement of competition rules.
| jandrese wrote:
| It's worth noting that Bell Labs existed because the
| government recognized that the Bell monopoly was a social ill
| and insisted that to counteract the problem some of the money
| had to be earmarked for research.
|
| Today the government doesn't even dream of that kind of
| regulation anymore. The idea of doing something purely for
| the public good seems to be lost in the race to make the
| quarterly numbers as big as possible.
| devonkim wrote:
| The trend changed partly due to the 80s cult of shareholder
| value worship enthused by Milton Friedman / Reagan that
| permanently altered the social contract of corporations. If
| the only responsibility of corporations is shareholders,
| then long-term growth and investment is difficult to
| justify given market tendencies to be so short-term focused
| over time.
| Merrill wrote:
| The operating companies were charged a 1% fee on revenues
| as a patent royalty and this funded Bell Labs Research,
| Systems Engineering, and part of Advanced Development of
| devices and systems. A similar amount was provided by
| Western Electric for advanced development, development and
| research on manufacturing technology. At times the research
| and development funding by the DoD was larger than the
| civilian part.
|
| I was told that one reason that Bell Labs was formed from
| parts of AT&T Engineering and Western Electric Engineering
| was to keep the researchers from meddling with the business
| and to keep the business from meddling with the research.
| The latter was important because a strategic objective was
| to use technological change as a driver to prevent the
| monopoly telecom business from going to seed. Within Bell
| Labs there were often competing groups working on
| alternative next generation systems - analog versus
| digital, tube versus transistor, space division versus time
| division switching, coax versus microwave, microwave versus
| fiber, etc.
| hindsightbias wrote:
| We would still have an Apple phone, but it would have a cord.
| It would be a really nice cord, but subject to fraying every
| year.
| kps wrote:
| No, it would stand up to any abuse, because you'd only be
| renting it. (Arguments about whether you really own an iPhone
| may now commence.)
| the-dude wrote:
| Ah, you must be talking about my beloved T65. You could
| commit a murder with it and nobody would notice.
|
| https://www.telefoonmuseum.eu/index.php/1980-tot-2000/toest
| e...
| kps wrote:
| Here it's the Northern Electric 500, which is the same as
| the Western Electric 500 in the USA. The fact that I can
| no longer place a call from mine (due to the central
| office^W^W line card not supporting pulse dial) is deeply
| disappointing.
| the-dude wrote:
| In NL, you could choose ISDN and get a 4-port adapter,
| and the first port supported pulse dial.
|
| Had a working T65 up to 2010. It was divorce, not
| deprecation which ended that.
| bbarnett wrote:
| True, but there are a lot of cheap pulse->tone adapters
| for just this purpose.
|
| Does it matter whether the line card, or you, handles the
| pulse?
|
| Bring back the joy, revel in your antiquties, buy one!
| lumost wrote:
| A monopoly can only grow revenue by increasing prices, or by
| creating new use cases and growing the market. The latter tends
| to pay off better in the long-run.
|
| Research tends to take a long-time to hit the market, in a
| dynamic market there is no reason to expect that a company
| funding open research would get a strong first mover advantage.
| A monopoly doesn't have this concern, Intel could fund semi-
| conductor research with decade+ time horizons and still be the
| first to put it to use.
| bleepblorp wrote:
| Modern business management doesn't care about the long-term.
| Research pays off future managers and owners in years, or
| decades, but increasing prices now pays off now in bonuses
| and dividends for current managers and owners. Behavior
| follows incentives.
| hammock wrote:
| "Giant bull market in the 1980s" more generally speaking
| IfOnlyYouKnew wrote:
| Corporations still do invest large sums of money into long-term
| projects: most acquisitions as well as buildings are amortised
| over a decade or so, which is about the time-frame I would expect
| research to have, on average. Airplane and car development also
| comes to mind.
|
| So I believe the complaint about "short-termism" has become a bit
| too popular. It's great to prop up your bona-fides as a cynic.
| It's less good at explaining actual behaviour.
|
| Instead, I believe research has simply become less profitable
| over time. The decades from about 1920 into the 1980 were a time
| of extraordinary rapid successes in the hard sciences: the
| scientific method had been established, and industry, finance,
| law, transport, and communications all made sudden jumps into
| modernity, allowing scientific institutions as we know them today
| to exist.
|
| If you read about the history of physics, for example, you'll see
| photos of the entire class of 192x at some German university, and
| every single person on the photo later won a Nobel or had at
| least some minor unit named after them.
|
| We have continued to improve institutions, infrastructure, and
| our ability to broaden the chance to get into the sciences. But,
| unfortunately, it's almost a rule of nature that progress slows
| over time. That's sort-of soothing, actually, because it means we
| aren't entirely incapable of prioritising easier thing.
|
| Government-sponsored research can continue at higher prices. But
| private, for-profit endeavours have a very specific point where
| expected returns turn negative.
| foobarian wrote:
| This 1000%. In the 40s, you invested a bunch of money into a
| research lab and you got the transistor. If only that kind of
| payoff could still happen today.
| aborsy wrote:
| Research is very hard and has low financial rewards. If it's
| funded by state, it's poorly paid (think of grad students,
| postdocs, APs). If it's funded by corporate, it's basically
| tedious product design and it's not interesting science or even
| proper research anymore. In industry, it's typically done by
| second class citizens. Long term research is worse.
|
| We have the classical problem of creating value vs capturing the
| value.
|
| I believe that's a major factor. I often meet students and the
| vast majority want good paying 9-5 jobs and don't want to bother
| with research or academic papers.
| kratom_sandwich wrote:
| Previous discussion:
| https://news.ycombinator.com/item?id=23246672
| akbirkhan wrote:
| I'm really confused. When looking at artificial intelligence it
| seems that actually we have dominating corporate labs which
| through integrated services (such as compute and data), totally
| dominate academia.
|
| It's coming to the point where researchers that want to make a
| difference are actively choosing corporate research labs over
| academic ones.
| chrisseaton wrote:
| > I'm really confused. When looking at artificial intelligence
| it seems that actually we have dominating corporate labs which
| through integrated services (such as compute and data), totally
| dominate academia.
|
| But this is just one unique case - where access to a lot of
| data and a lot of compute makes a huge difference.
|
| I'm not sure that it translates to many other fields in CS.
| jrochkind1 wrote:
| Interesting, after the Bell Labs example, I was going to guess
| that anti-trust enforcement meant that companies weren't big
| enough to afford an internal lab anymore.
|
| But the OP, quoting/citing Arora et al, actually suggests the
| REVERSE causative correlation:
|
| > Historically, many large labs were set up partly because
| antitrust pressures constrained large firms' ability to grow
| through mergers and acquisitions. In the 1930s, if a leading firm
| wanted to grow, it needed to develop new markets. With growth
| through mergers and acquisitions constrained by anti-trust
| pressures, and with little on offer from universities and
| independent inventors, it often had no choice but to invest in
| internal R&D.
|
| And that in fact later "lack of anti-trust enforcement... killed
| the labs".
|
| Makes sense to me. Goes to show that our "intuition" (of course
| informed by cultural assumptions) for how capitalism works and
| it's effects isn't necessarily accurate.
| linguae wrote:
| As a (non-PhD) researcher who works for one of the last
| traditional industrial research labs in Silicon Valley, I've
| noticed this trend for years. I've seen industrial research labs
| either close or become increasingly focused on short-term
| engineering goals. I also have noticed that newer Silicon Valley
| companies have adopted what Google calls a "hybrid approach"
| (https://research.google/pubs/pub38149/) where there are no
| divisions between research groups and product groups, and where
| researchers are expected to write production-quality code. I've
| noticed many of my PhD-holding peers taking software engineering
| positions when they finish their PhD programs, and I also noticed
| more people who were formerly employed as researchers at places
| like IBM Almaden and HP Labs switch to software engineering
| positions at FAANG or unicorn companies.
|
| Unfortunately, as someone who is also working toward finishing a
| PhD, I've seen very little guides for CS PhD students that
| reflect this reality. To be honest, I love research and I'd love
| to stay a researcher throughout my career, but I don't have the
| same love for software engineering, though I am comfortable
| coding. Unfortunately with these trends, traditional research is
| now largely confined to academia, which is very competitive to
| enter and where COVID-19's effects on its future are uncertain at
| this time, and federal laboratories such as Los Alamos and
| Lawrence Livermore. I fear losing my job (nothing lasts forever)
| and having to grind LeetCode since there are few other industrial
| research labs, though given the reality maybe I should start
| grinding LeetCode anyway.
| wrnr wrote:
| I have but a highschool degree and coding is the way I make
| money, try as I might not to feel any schadenfreude for every
| researcher failing to secure funding or find gainful employment
| in their special interest area, I am only human.
|
| The BS that people with the title Philosophiae Doctor get away
| with is a bane on society. Don't get me wrong, I love bio, math
| and physics, but too often it feels like what is called
| research is a job program for thick skulled idiots. Maybe you
| can be saved from this faith, and learn what the real world can
| teach you on the nature of reality.
| MattGaiser wrote:
| > learn what the real world can teach you on the nature of
| reality.
|
| People focused on the "real world" tend to only see the world
| as it is now. That is the exact opposite of what research is
| generally about.
| wrnr wrote:
| Hey, did this guy just call me narrow minded, in that way
| people argue whether black lives or ALL lives matter?
| MattGaiser wrote:
| > and where researchers are expected to write production-
| quality code.
|
| For someone like myself who has no idea what research labs do
| beyond "build cool stuff" why is this a problem?
|
| Is it just outside your core competency? Eliminates a lot of
| good researchers?
| [deleted]
| godelski wrote:
| Because the skill sets aren't the same. Research in of itself
| is a different skill set. Getting a PhD is more about
| learning how to take abstract and vague ideas and turning
| them into a reality. Making highly readable, robust, and
| secure code is a different skill set. Sure, you can have
| people that do both, but at that point you're often asking a
| painter to do sculpting. Skills do translate, but not well.
| They probably won't be interested in it either, so you're not
| using your workers efficiently either. Give the canvases to
| the people who love painting and give the marble to those
| that love sculpting. You'll probably get better art in the
| end.
| wongarsu wrote:
| As a rule of thumb I would say that building something
| "production-quality" takes at least ten times longer than
| building something I and close collaborators can use. By
| having researchers build production-quality code the spend a
| lot more time with software engineering and a lot less time
| researching. (And of course many great researchers are
| actually not that great at programming, so you probably lose
| many of them as well)
| musicale wrote:
| > maybe I should start grinding LeetCode anyway
|
| You should start grinding LeetCode if you plan on interviewing
| for industry jobs, because it might help you survive those
| awful white board/algorithm puzzle interviews.
| draw_down wrote:
| That's literally the only reason people do leetcode, friend
| als0 wrote:
| I know a (non-PhD) researcher who moved on after one of those
| labs closed and sadly he finds it impossible to get a research
| job again. Academia is his only option but he'll have to earn a
| PhD before getting such a job...
| ylem wrote:
| Yeah--it's a different era. I know people who do research who
| have masters, but they are effectively grandfathered in.
| linguae wrote:
| It's a tough situation, especially for non-PhD holders. Even
| with a PhD it's possible for a researcher to enter a rough
| patch where a career change looks inevitable. The last time I
| was unemployed I started sending out my resume to various
| community colleges and universities to enter their part-
| time/adjunct lecturer pools (I have a masters), but
| unfortunately my lay-off period didn't match well with the
| academic hiring period. I managed to get a few interviews for
| software engineering positions, but the algorithms-based
| interviewing bar is very high these days for a software
| engineering job, and admittedly my software engineering chops
| degraded due to spending years in research. Ultimately I
| ended up finding an AI residency program at a research lab,
| which is how I ended up at my current position, but it
| required switching research areas and taking a minor salary
| drop.
| xtracto wrote:
| When I was doing my PhD (CompSci) in the late 2000s I looked
| forward to join Microsoft Research because it seemed they were
| doing really cool stuff, even at a time when "corporate"
| Microsoft was the bad kid (me being very pro-Linux at the
| time).
|
| One thing lead to another and I ended up going to another
| Research Assistant role and then getting fed up with research
| and going into industry.
|
| But the idea of the Xero lab, Sun Microssystem and later
| Microsoft research was something I always really dreamt about.
| Nowadays I think startups doing autonomus vehicle technology is
| what looks similarly disrupting to me, but I am too much down
| into the SaaS rabbit hole.
| smeeth wrote:
| You only mentioned the DOE national labs in passing-I encourage
| you to give them more thought. I'm currently a researcher at
| one of them, and if you land in the right group/application
| area it can be truly meaningful work.
|
| If you're in the bay I encourage a closer look at LBNL and
| LLNL, if you're open to moving, NREL is in a great location
| too. Obviously Sandia, LANL, ORNL, and PNNL all do good applied
| CS work as well but the locations are a little more remote and
| options are better if you can get/hold a clearance.
| totesraunch wrote:
| This is Capitalism. Let the government and educational
| institutions spend all of the money, do the real work and
| research, and then as a private company swoop in and reap all of
| the benefits.
|
| A blatant example would be Gilead Truvada for PrEP. US Tax payer
| funded research and all profits go straight to Gilead.
| ylem wrote:
| I remember an interesting article (I can't find the reference)
| that made the claim that for a number of pharma labs, the
| advantage in hiring researchers is not that they are likely to
| make a great discovery--but rather that they will be up to date
| with the literature and be able to recognize a potentially great
| discovery and to productize it. This is not necessarily trivial
| as a number of things that work in an academic lab setting don't
| translate into actual usable drugs.
| timkam wrote:
| What worsens the problem is that publicly funded research often
| solves toy application problems (at least in CS); academics know
| that they need to "apply" their research to get
| funding/citations/publications with relatively little effort, but
| from an industry/real-world perspective, many application
| scenarios hardly make sense and are hand-wavy-ly evaluated (for
| example, in applications of CS, too often the code is not shared
| so that the results are practically not reproducible). The
| current system simply rewards researchers who manage to get into
| the top venues with the least effort possible, and for many who
| aren't brilliant the pseudo-application approach is the way to
| go. IMHO, this broadens the gap between academia and industry,
| because it's hard for a practitioner to pick out the few relevant
| nuggets in a stream of half-baked applied research.
| ChrisLomont wrote:
| As of 2016 corporate R&D was at a record high.
|
| https://www.aip.org/fyi/2016/us-rd-spending-all-time-high-fe...
| dnautics wrote:
| Maybe it's more fruitful to not just consider the Death of
| Corporate Research Labs, but also ask ourselves "why did they
| even exist in the first place?" This day in age, the
| _expectation_ , for better or worse, is that the State sponsors
| research; this was very much not the case from, say 1850-1950.
| Luminaries did tons of basic science research under the auspices
| of corporate (like Irving Langmuir) and private (like Peter
| Mitchell) labs.
|
| Without assigning causality (I happen to think that the primary
| cause is "low hanging fruit" phenomenon), the transition to state
| sponsored research has coincided with a general loss of
| scientific productivity in many fields, and even in some fields
| with explosive growth, like genomics, there has been major
| corporate involvement (half the human genome was sequenced by a
| not just private, but a wall-street traded, entity).
|
| Yet the narrative of late has been "if the state doesn't sponsor
| it, nobody will". I don't feel like I have a solid understanding
| of why corporate research labs were a thing, or even, how science
| got done in the pre-manhattan-project/Vannevar Bush era.
| owowow wrote:
| Up until the 1950's pharmaceutical development was entirely a
| government enterprise:
| https://www.google.com/url?q=https://www.slu.edu/law/academi...
| refurb wrote:
| What? No.
|
| People seem to get confused on what actually goes into
| bringing a new drug to market. Yes, a significant amount of
| _basic research_ is done through government funding. But
| discovering a new drug target is about 20% of the way to a
| new drug.
|
| You still need someone to develop new candidates, screen
| them, identify promising compounds, bring it through years of
| clinical trials, develop a manufacturing process, get FDA
| approval and then sell it.
|
| A good rule of thumb is that the cost of R&D is typically 1/3
| research and 2/3 development. Development is almost always
| entirely private. And a significant amount of research is
| too.
| godelski wrote:
| Basic research is one of the riskiest aspects though. It is
| much easier to justify internal research on a product where
| basic research shows that it works and suggests it will
| scale. MUCH harder when it is a moonshot. You'll notice
| there's a difference in capital between companies that do
| the former vs the latter.
| ori_b wrote:
| When people talk about the death of corporate research
| labs, they're largely talking about the death of
| fundamental research -- places like PARC, Bell Labs, etc.
| Corporate research to take fundamental discoveries and find
| better ways of productizing it is alive and well.
| refurb wrote:
| At least from the pharmaceutical perspective, there has
| definitely been a shift away from basic research. Why?
| Well, in the past, it was drug companies that had the
| money to actually fund it. It wasn't a big deal to spend
| $1M on the latest lab equipment. We had university
| researchers asking for time on our equipment.
|
| From talking to some of the old-timers, universities
| started to get better and better funding (NIH grants,
| royalties, etc) and eventually could buy the equipment
| they needed themselves, no need to rely on drug
| companies.
| jhbadger wrote:
| One thing to remember is that not all research was being done
| in corporate labs. A lot of it was being done in universities
| as today? How was it funded? A lot of competitive funding
| agencies similar to today's NIH/NSF except being run privately.
| It's interesting that you bring up Vannevar Bush. He actually
| ran one of these private funding agencies (The Carnegie
| Institution) before being tapped to run the Office of
| Scientific Research and Development and modeled this (and the
| NSF, which he later ran) after the Carnegie -- that is, he had
| scientists write proposals which were evaluated by their peers
| and the ones judged best funded.
| ylem wrote:
| I think part of it is a scale question--there are a number of
| discoveries that require a huge investment in both manpower and
| equipment. Beyond the work of corporate research labs, there
| are some discoveries that don't have immediate payoff--think
| for example general relativity. Yet, attempts to measure it led
| eventually to atomic clocks and to GPS.
| samuell wrote:
| > half the human genome was sequenced by a not just private,
| but a wall-street traded, entity
|
| They reportedly were so successful in a large part because of
| re-using a lot of data already pain-stakingly produced by
| publicly funded research labs.
| dnautics wrote:
| No, they pivoted to shotgun sequencing earlier, which had
| better scaling properties because it's self-decoupled. There
| was a hangup about it only affording asymptotic completeness
| (aka completeness was "only theoretical") and them they
| realized how silly that statement is, and how the decoupling
| trade-off gave them an advantage because of their deep
| pockets.
| kevin_thibedeau wrote:
| Edison made them fashionable. There was also a lot of low
| hanging fruit to pluck in the 20th century.
| ghaff wrote:
| I'm sure it's not the whole answer, but given large profitable
| companies with (for the moment) unassailable market positions,
| the answer may come down to "Because they can."
|
| Everyone likely agrees that most large companies should have
| some longer-term speculative projects going on. As those
| companies get wealthier and fatter, those research
| organizations want to grow, they help position the company as
| an "innovator," and they may even have an OK payback over a
| long enough time horizon.
|
| As to that time horizon, people have been arguing about that
| and it's swung back and forth at different forms for as long as
| I've been in the industry.
|
| I think it's also true that there were always a relatively few
| large true research labs. There's a reason that, say, Bell
| Labs, Xerox PARC, and IBM Research come up (in roughly that
| order) and then most people have trouble naming examples.
| UncleOxidant wrote:
| > This day in age, the expectation, for better or worse, is
| that the State sponsors research
|
| But the state (at least the US state) has been cutting spending
| on research over the last several years - and those cuts have
| accelerated under the current administration which does not
| seem to understand the value of basic scientific research.
| Goladus wrote:
| That's untrue and not really relevant to the point anyway.
| Spending changes are small relative to the total spending,
| and have been increasing, for the most part.
|
| NIH budget for example increased from $32 billion in 2016[1]
| to $41.68 billion in 2020. Trump has proposed a 6% cut for
| the 2021 NIH budget but that is not finalized yet.[2]
|
| NSF budget increased 2.5% from 2019 to 2020, to $8.3 billion.
| [3]
|
| NOAA +4%. [4]
|
| DoD Science and Tech: +1%. [5]
|
| [1] https://www.nih.gov/about-nih/who-we-are/nih-
| director/fiscal...
|
| [2] https://www.the-scientist.com/news-opinion/trump-
| proposes-si...
|
| [3] https://www.aip.org/fyi/2020/final-fy20-appropriations-
| natio...
|
| [4] https://www.aip.org/fyi/2020/final-fy20-appropriations-
| natio...
|
| [5] https://www.aip.org/fyi/2020/final-fy20-appropriations-
| dod-s...
| scarmig wrote:
| Cutting research is an overstatement: US federal R&D funding
| has been increasing, just at a significantly lower rate than
| GDP. Since it's ideas being created and not widgets, you'd
| expect the same number of researchers to create at least as
| much positive impact for society through idea generation.
|
| It seems obvious that they haven't.
|
| I don't think it's anything nefarious about government
| funding (or lack thereof) that did it; it's just we've
| already picked all the low hanging fruit. Plucking all the
| undiscovered ideas at the frontier of knowledge will be
| increasingly expensive, because if they were cheap to
| discover, we already would have.
|
| Though I always wonder if there's some trove of cheap ideas
| hanging out somewhere...
| pasabagi wrote:
| Doctoral students are absurdly good value for money, especially
| in nations that have a high density of high prestige
| universities, and they both train the workforce, and are
| trained. So I think it's an obvious move for states (especially
| ones with a ton of grand old universities) to milk that for all
| its worth. It's a way of transforming historical prestige, and
| a smattering of cash, into a competitive economic advantage.
|
| I guess the flipside of this is that, for a business, it makes
| way more sense to give money to a university than it does to
| start your own lab. You'd be paying real (and probably decent)
| wages to people who wouldn't be nearly as motivated as the phds
| who do the same work for less than minimum wage.
| jorblumesea wrote:
| Implying research today is anywhere close to research of the
| past. The amount of capital and complexity to do fundamental
| research far eclipses what was required in the past.
| criddell wrote:
| Is there anything like ARPA's VLSI Project running today? That
| project has to have had one of the greatest cost:benefit ratios
| ever.
| banjo_milkman wrote:
| DARPA does have some interesting VLSI projects running
| currently. Some of the ones I've noticed are:
|
| Chiplets: https://www.darpa.mil/program/common-heterogeneous-
| integrati...
|
| PIPES - optical chip io : https://www.darpa.mil/news-
| events/2020-03-16
|
| Automated ML chip generation: https://www.darpa.mil/attachmen
| ts/Real%20Time%20Machine%20Le...
| f00zz wrote:
| This sounds a bit hyperbolic when you have Microsoft doing pie-
| in-the-sky research on topological quantum computing, Google and
| IBM research teams arguing over quantum supremacy, etc.
| valenciarose wrote:
| Under-taxation of corporations plays a significant role in the
| decline of research spending. While potential competitive
| advantage is one reason to pursue research and development, taxes
| and the interplay between tax and corporate accounting are
| another reason (even prior to 1981).
|
| While taxes paid by corporations benefit the general public, from
| the corporation's point of view taxes are money out the door with
| zero possible return. So what does a prudent corporation do with
| its profits? It recognizes that they are potential capital and
| seeks to maximize the risk-adjusted return on capital.
|
| It can bank them at the risk-free rate of return, but we should
| remember taxes will take a healthy chunk out of that return on
| the front end. It can pay them out to investors as dividends
| (increasing the return on remaining capital by reducing the
| denominator). Note that under rational tax schemes the risk
| adjusted return on capital should be equivalent to investing at
| the risk free rate of return (modulo management of cash-flow
| risks). It can buy riskier assets with higher return, such as
| other companies. And it can make much riskier investments, like
| research and development. As with most things financial, the best
| overall risk adjusted return on capital is diverse in both kind
| and in risk level. It should do all of those things (treating
| dividends as equivalent to investment at the risk free rate of
| return), with the proportion going to each tuned to achieve the
| aggregate optimum(1). Also, can you see how a regulated utility
| with(like AT&T of old) would find R&D attractive for spicing up
| its asset mix?
|
| Think of R&D as producing a stream of lottery tickets with the
| drawing in the distant future. Those lottery tickets (for a tech
| company) can pay off in two ways. One is that they could produce
| or enhance a revenue stream. The other is that they could reduce
| risk in the form of patents (reduce competitive risk and risk of
| patent suits by threat of countersuit). Both of these payoffs
| improve risk adjusted return on capital (by generating return or
| reducing risk). The neat thing about R&D for a company that's
| paying real taxes is that much of the cost is (from a tax point
| of view) is an expense. In other words, that allocation of
| capital doesn't have the upfront bite taken out of it that occurs
| when profits are directed to risk free assets. Looking at this
| from a risk-adjusted return point of view, having a real tax
| burden increases the appetite for risk by decreasing the relative
| attractiveness of the risk-free alternative after taxes. This is
| doubly true for expenditures that look like expenses to tax
| collectors but look like capital investment for corporate
| accounting purposes.
|
| None of this holds true if a company isn't paying much in the way
| of taxes on its profits. It doesn't mean some amount of R&D isn't
| still attractive, but the appetite for risk is lower. And let's
| be clear, R&D in research labs is the riskiest kind of R&D.
|
| Well, you might say, the 1981 R&D tax credit is sweeter than a
| deduction. Doesn't that tilt the scales back? Yes, but subject to
| the limitations of the tax credit (which are numerous). But, like
| the deduction, the tax credit is much less valuable for companies
| that aren't paying taxes on their profits. And, to be clear, this
| is a Reagan measure taken with full knowledge of what was
| expected to happen to corporate tax rates and the impact that
| might have on R&D investment. It's a partial mitigant for that,
| nothing more.
|
| I am fully aware that I have murdered both CAPM and the practice
| of accounting in compressing this down to a reasonable post with
| what I hope is a clear narrative. My apologies to practitioners
| of both.
|
| (1) An important aside: People make equity investments to take
| more risk in the expectation of higher return. Beyond the cash
| cushion necessary for minimizing cash-flow risk, massive cash
| hoards do nothing but dilute the risk (and return) rational
| investors are actively seeking to take. There is some argument to
| be made that large tech companies keep huge cash hoards because
| their core businesses are riskier than they appear (esp black
| swan events), but it probably has more to do with founders desire
| for independence.
| TabTwo wrote:
| Looking out of my office window in Stuttgart I can see the big
| sign ,,Nokia Bell Labs". You can almost smell all the history
| this sign carries
| CharlesMerriam2 wrote:
| This type of article comes up from time to time, and is generally
| wrong on many points.
|
| * Corporate Labs are not for primary research, at least in the
| United States. In the U.S., any primary research is done at
| universities, developed from research to prototype and patent at
| NASA, and then licensed to a U.S. company to go to product. For
| non-primary research, prototypes are developed by corporations
| via grants from government agencies.
|
| * Bell Labs, before AT&T monopoloy breakup, was a special
| business case. Its funding existed in a game of legislation
| maneuvering. It is not an exemplar.
|
| * Think of labs as "tier 5 tech support, when the engineers are
| stumped".
|
| Most labs are holding areas for smart people to solve sudden
| business problems. For those who read the famous analysis of
| criticality accidents in non-military settings, you need some
| smart folk hanging around to prevent disasters.
|
| For example, Sun Labs had people working (forever) on some
| hopeful breakthrough. Howard Davidson, a failure engineer, was
| pulled off task when server boxes started breaking (paper washers
| being glued in manufacturing) or card connections started failing
| (silver substituted for gold). These were high impact problems
| not solvable by line engineers.
|
| Similarly Ricoh Labs had a day when everyone was pulled off to
| disassemble a large machine and figure out a feeding problem that
| had a hard solution. Intel keeps materials PhDs in the fab areas
| just in case something comes up that would slow throughput.
|
| * Many labs have reputations no longer deserved. I worked at PARC
| and found some teams made magic and others made bloat. Look at
| the short term results, meaning the past decade, to rate a lab.
| mensetmanusman wrote:
| " Large corporate labs, however, are unlikely to regain the
| importance they once enjoyed. Research in corporations is
| difficult to manage profitably. "
|
| The easy fix is to classify the work as a net positive for a
| community, and provide tax incentives such that it becomes by
| definition profitable, since society can cost-in the scenario
| where the lab doesn't exist.
| lotsofpulp wrote:
| Sounds like an easy way to introduce a million loopholes and
| legalese trying to define research that is a "net positive" for
| a community.
| mensetmanusman wrote:
| If the government/law isn't up to the challenge, I could see
| that they would rather do nothing. The downside is R&D moves
| to other countries.
| IfOnlyYouKnew wrote:
| Research can obviously be deducted from profits for tax
| purposes already, just like most other business expenses.
|
| Beyond that, it it's quite hard to set up a system where the
| incentives still motivate good research. It may also just make
| more sense for governments to spent the money on university
| research or institutions like the Max Planck Society, rather
| than giving it to companies where the public gets less of a say
| in its use, and any profits are privatized.
| mensetmanusman wrote:
| Govt. tried that during WW2, it found that nothing got
| commercialized because you need a business structure
| surrounding the research.
| khuey wrote:
| R&D tax credits are pretty common.
| mensetmanusman wrote:
| Yes, this is true. Maybe another tax needs to be invented to
| disincentivize wall st. from trying to kill research (as the
| article claims)...
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