America has become too anti-innovation | Hacker News Reader

America has become too anti-innovation

theguardian.com

99 pointsGraham24140 comments

Hate on this guy all you want, but there's a lot right with this article. I covered this same set of issues at Ars way back in the day:

https://arstechnica.com/uncategorized/2006/07/7340/

https://arstechnica.com/security/2008/03/paying-for-secrets-...

What passes for "innovation" nowadays, especially in the world of software startups that HN tends to venerate, is typically nothing of the sort. It's actually just gambling.

https://collectiveidea.com/blog/archives/2015/09/24/the-righ...

To do real innovation of the kind that got us where we are, today, you need to fund lots and lots of basic research on multi-decade time horizons. (Here's a rule-of-thumb test: if you and about 20 hotshot engineers could clone the product in a year, then it's not innovation, at least not in any worthwhile sense of the term that the generation that gave us the Internet and the transistor would recognize.)

The stock market's quarterly focus, which incentivizes base hits and accounting tricks and punishes real risk-taking, makes the public sector a terrible place to do this kind of long-term, blue-sky work.

Anyway, this is one of those sad, stupid stories like electronic voting -- a few people who are paying close attention write about it for a decade and bang the drum, and nobody really listens, and then when it's way too late people start to wake up to the problem.

If you hated this article and came here to bash it, you'll have plenty more opportunities to trash this same argument, because it's one that way more people will be making as this freak-show drags on. That's because it's basically right.

I think the paradigm shift is that companies like Google are doing research (e.g. security and algorithms) at a quality level that only existed in academia. IBM has a long history on basic research but they are not capable to move those inventions to the real world except in press releases.

> The stock market's quarterly focus

This idea constantly resurfaces. It's easily shown to be incorrect. If it was true,

1. companies would have low P/E ratios

2. companies that "eat their seed corn" to sacrifice the long term for short term gain would see their stocks dump after quarterly results come it. This is not happening.

3. you could get rich by shorting those short term companies, making money off of the fools that bid up share prices for short term profits. This is not happening.

4. A successful stock investment strategy is buy and hold, hold, hold, hold.

5. AMZN

All that is assuming investors don't know what's happening. Stock price only changes in response to quarterly results if the quarterly results are different from expectations.

The real problem is that if you have a company which is losing money for several years, their leadership will generally be fired, even if they're losing $100M/year for an annual 5% chance of making $20B.

AMZN is famous for losing money for a decade, yet having constantly escalating stock valuations.

I don't think investors are fools. The alleged short term focus of investors and companies requires them to be fools (as a group). Also, the continued growth for decades of corporations simply doesn't fit with being short term focused.

Boeing.

Heh, you've picked the one counter-example that I was going to toss in there, but didn't. Amazon built its cloud business during the lean times after the dotcom bust, when there wasn't a ton of money chasing risk in the tech sector. So they were able to focus on the long-term and on building an entirely new kind of business.

They could do it because they had the resources thanks to their core business and, more importantly, they could retain the engineering talent in a world where rockstars couldn't just quit and raise VC megabucks to pursue "Uber for Cats" or some adtech play.

So it has turned out that AMZN is an anomaly, judged by its P/E ratio as you point out, in that investors will let it bleed for a long time and still value it highly.

There are a few companies like that, that can afford to fail and that the market will have patience on a fairly long time horizon. In those places you can get a little taste of what it was like to work at a government-funded blue-sky research lab with no pressure to productize in a commercial timeframe.

Boeing regularly does bet-the-company projects with 10-15 year time to break-even. Tesla's another. The whole biotech industry.

If you've got a convincing case, investors are happy to invest in long term projects.

AMZN isn't really losing money, they're just reinvesting it rather than paying it as dividends. Their stock price goes up because they're consistently converting cash into business value worth more than that amount of cash. But they're mostly not making long-term plays, they're making good short and medium-term plays.

And Boeing isn't high-risk. It's high-cost low-risk. Aircraft are very expensive but also well understood.

> The alleged short term focus of investors and companies requires them to be fools (as a group).

The consequence is a result of structural failure, not individual failure. We put abstraction layers between investors and their investments. John has a 401K, he invests it in a mutual fund, the fund invests it in corporations, the corporations invest it in business units, the business units invest it in research. At every layer of abstraction, the level above doesn't want to spend resources understanding the details of the bottom tier, they just want to see numbers that are higher this quarter than last quarter. Because John doesn't have time for that and if he is only looking at quarterly results then the mutual fund manager's incentive is to produce quarterly results, which flows all the way down to the bottom.

The only solution is for investors to know what they're investing in, which requires more smaller corporations and fewer layers of abstraction.

In a sense it's basically the case that wide diversification is free-riding on the analysis done by the other investors in the same stocks, but the more people who do it the less efficient the market becomes because there is less thought going into where money is invested.

> It's high-cost low-risk.

The history of the airframe industry is filled with huge bankruptcies. It's a very volatile, high risk business.

> they're just reinvesting it

And that's exactly what the proponents of the short-term profit theory complain that businesses are not doing.

> The history of the airframe industry is filled with huge bankruptcies. It's a very volatile, high risk business.

Not at the scale of Boeing. They can survive a failed project, and a failed project is very expensive but most Boeing projects don't fail.

The hard part about long-term research is that most foundational research projects do fail to commercialize and you have to stick it out until you get the one success that makes up for all the failures.

> And that's exactly what the proponents of the short-term profit theory complain that businesses are not doing.

They complain that businesses are not investing enough in long-term research, which is what they are not doing.

> Not at the scale of Boeing.

Yes, at the scale of Boeing. I am familiar with the industry, and it is anything but "safe". Boeing took an incredible risk with the 747. And if Boeing screws up today, Airbus will have them for breakfast.

AT&T was founded in the 1870s. But it wasn't until 1925 the research activities had gotten so massive that they spun it out in Bell Labs.

Apple and Microsoft are around 40 years old, but Amazon and Google are much younger companies and Facebook is not even a teenager yet (although it's no longer run by one).

Give these companies a few more years to build equally impressive research wings :-)

So we should be anticipating the breakup of those monopolies somewhere around 2076?

We could keep subsidizing these companies by giving up our privacy while they build up said research wings, or we could just spend it on research wings that are already decades old (you know, the unis that made those companies possible).

You're right, they do produce useful stuff, but it's a really inefficient way of doing it.

If free enterprise does not produce innovation, or is inefficient at it, then unfree economies should be fountains of innovation. I haven't noticed any such coming from such economies.

The argument isn't black and white. We're a "free economy" but we still control and regulate certain things in the market. The argument is that this is a specific instance where our "free economy" is failing and so we should use government to address that. It bears no comparison to "unfree economies."

I just don't think that's going to happen. Bell Labs was never profitable, was it? Look at Xerox PARC--all the stuff they invented there that Xerox never profited from, although many others did. It's just not in company DNA anymore. They would rather buy out startups.

> if you and about 20 hotshot engineers could clone the product in a year, then it's not innovation

I think this statement runs against the argument these OP is trying to make. It's the massive number of failures that occur on the way to finding the innovation that important but don't show up when duplicating the end product. It's not hard to make a lightbulb if you have a good vacuum pump and know what filament to use, but trying thousands of different metals while inventing new vacuum techniques is expensive and hard.

(I appreciate your core argument, I just think this particular statement runs against it)

I don't think it does, though. "Innovation" isn't solely a function of the number of failed attempts, despite the fact that this particular way of looking at it has become trendy of late. Take a look at that last link, and specifically at how I unpack the lightbulb analogy that you used above and that's so popular with the "fast failure" set:

https://collectiveidea.com/blog/archives/2015/09/24/the-righ...

"Yeah, I know, I’m a jerk, because a startup is the hardest and most punishing thing you can do, and it’s considered rude to suggest that anyone’s success at it is largely attributable to luck and not “innovation”. And I’m sure you’re also thinking of Thomas Edison, and how he famously tried 1,000 different filaments before inventing the light bulb and then boom, innovation! Isn’t Airbnb just like that? No, it isn’t, because that story is bunk.

As Thomas Parke Hughes describes in his magisterial Networks of Power: Electrification in Western Society, 1880-1930, Edison and his team at Menlo Park built an entire, low-cost electrical distribution network, of which the light bulb was one of a number of critical new components. It wasn’t like the electrical grid was just sitting there with empty sockets, waiting for Edison to diddle his way through the solution space until he stumbled into just the right filament so that he could staff up and scale; he had to invent, finance, manufacture, and deploy the entire grid in order to take on the entrenched gaslight industry."

I'm not disputing your thesis about the need for basic research and long term investment ( and definitely alot of what's on HN is hype), but could it be that in today's world, deep innovation can be done in a more distributed manner and small research groups are much more powerful , especially since we already have a lot of the needed infrastructure ?

Why does the argument that "the government should spend more on basic R&D" need to be packaged with "no-one outside of academica ever does anything innovative"?

Most people in tech wholeheartedly agree with the former and disagree with the latter.

You don't need to be in academia, but you do need to create a working environment that shares some of the same features. Very few companies do this well; most don't do it at all. Which isn't to say it's impossible to innovate in industry - but typically it is actively made much more difficult.

It's undoubtedly true that "innovation" is a term that is much abused in industry, weakened to the point it is mostly meaningless.

Not what I said. I realize that it's asking a lot to click through to the underlying links (said without irony, since I rarely do that myself anymore :), but I'm talking just as much about the massive network of labs that was funded by tax dollars in the cold war, only a portion of which were in universities.

I was in academia for years. I didn't see all that much innovation coming out of there, either. Too much politics and rent-seeking (gotta get that next grant) and you have to publish, and there's committees and conferences. And then whenever we did invent something cool, the university patent office wouldn't take it and do anything with it! I should have 2-3 patents now and instead I have none. Not that I'm a fan of patents, anyways, but it was the late 90s and my adviser and I were breaking new ground at the time.

A lot of people can clone a TCP/IP alike stack + a router by themselves in less than a year. Assuming one only needs to clone the product function, "route packets over a network", not all the concrete implementation details. The daunting part is being compatible with all the written sometimes unwritten, corner cases of the actual TCP/IP spec.

By the proposed measure, the Internet is not innovation.

"Things that speak IP" is the definition of the internet.

So...I don't get your argument.

I have a different theory. You need access to users/customers of problems you're trying to solve. I guess the first couple of rounds of tech boom happened in the valley because of the access to chip makers, early internet adopters etc.

What this probably means is just that valley doesn't matter anymore to every industry/market. Probably also explains why we're starting to see more international startups at YC.

Even though I'm a small government, pro-markets kind of guy, one point this article touched on which I find quite interesting is that so much of the good stuff on the Internet (TCP/IP, the WWW, NCSA Mosaic, the Linux kernel, the IRC protocol, etc.) was basically publicly funded--if not directly then it was usually a guy at a university somewhere.

Whereas the bad stuff (AOL, Internet Explorer, spam, the scammy digital ads industry, Orwellian Google, Orwellian Facebook, mandatory DRM) has generally come from the private sector. (And VC, dear Hacker News, bears its share of responsibility.)

My only takeaway from this, and it is admittedly milquetoast, is we should take a little more of that public money we spend on war and instead spend it on general science and technology research.

It's funny you end your comment with that remark on war...

The Internet you mentioned at the top of your comment saw its roots as a DARPA project called "ARPANET". That's right, it was a Department of Defense project.

During the Cold War and the Space Race, the military was heavily tied with "general science and technology research". Aerospace, materials, you name it, if it had some sort of military application it was looked into.

So yeah, war sucks and the military might waste money in some projects but it's unwise the look at military and science in black-and-white, this-or-the-other terms.

Its common to credit the military with scientific advances. But when you spend a trillion dollars, and get non-stick skillets, you start to wonder if there was a cheaper way.

Its like, "I don't like being an assassin, but at least I get to meet new people".

DARPA just funds research. There's no reason that has to be done through the military, that's just the way it is right now. If DARPA had the same funds but was part of the department of transportation or something, we still would have gotten the internet.

We still need defense research, but the fact that a lot of our advancements have come through the military doesn't mean that's the only way it can happen.

Wasn't ARPANET started as a project where individual communication nodes could fail, and the message could still arrive? Military technology generally needs to be reliable, which makes it a good fit for civilian use as well. Of course, there are plenty of aspects of military technology that isn't as necessary in civilian life.

It was originally an internal tool for ARPA researchers to collaborate. It had very little to do with the military, and ARPA scientists were not the only ones working on something like this. It absolutely would have happened somewhere else around the same time if the defense department wasn't interested.

You're overlooking the counterfactual here. The fact that ARPANET was a Department of Defense project doesn't mean that defense spending itself caused it to come to fruition, and similarly it doesn't mean that without war (and defense spending), something like the ARPANET would never have been invented.

Separately, it seems far more significant that the early ARPANET was composed of networked computers based at universities.

This is very true, however DARPA was not prosecuting wars -- it was doing, well, general science and technology research intended to assist us in prosecuting wars.

Ultimately we reaped benefits far greater than those intended.

So maybe if the military merely shifted more of its budget from actually dropping bombs over to R&D, we would at least be making progress.

Sometimes I wish the military could only start R&D projects for things they can find civilian applications for.

That way we wouldn't need an actual shooting war to reap the benefits.

Yes, the concept that military research funds other innovations is just all backwards and silly. It's just like when they justify the space program by saying "we invented Tang!" Really? Because it would have been cheaper to just invent Tang, then.

Well, it's also possible that without the space program we never would have invented Tang at all. This scenario seems more realistic when you apply it to the Internet, the design parameters were pretty nuts -- they were trying to come up with a communications network which could survive a nuclear war. And no one was really saying that we needed the Internet until we already had it, but afterwards it was obvious how great it was. Without DARPA who knows if we would have gotten anything like the Internet we have today.

Point is having lots of people out there doing very random and diverse research is a good thing. It may not be the most cost efficient path from A to B, but serendipity provides for some remarkable outcomes we might never have achieved otherwise.

It can unearth "unknown unknowns" to borrow from Rumsfeld. Or "black swans" to steal from Taleb.

What's the (right wing) libertarian strategy for mitigating our winner takes all economy?

Having actually read some Adam Smith (not the whole book), he goes on and on about asymmetric access / advantages granted through government and how it must be prevented. The free-market strategy is to recognize that the winner take all capitalist frequently uses the government as the vehicle for winning, and thus limit government.

That is not the same as no regulation / de-regulation! Adam Smith was basically saying we need regulation, to keep the government and business apart.

IMO, government regulation works when it is structural (e.g. Glass-Steagall worked because it was a simple structural rule) and when it is at the right level (DMVs works because they are state based) and it is easily understood.

I want to believe that governance (such as market regulations) can work when there are checks & balances, transparency, accountability.

Who says they need one?

Define a "libertarian" as someone who advocates for the state to play a minimal role in the lives of people.

There are a few different reasons I could be libertarian:

1> I believe that I will be better off if the scope of the state's activity is minimized.

2> I believe that most people will be better off if the scope of the state's activity is minimized.

3> I believe the world will be more just if the scope of the state's activity is minimized, whether or not that leads to anyone being better off.

Libertarians in groups [1] & [3] need not offer a strategy for mitigating any economic phenomenon, even if that phenomenon is to the detriment of the majority.

I've heard people argue the validity of belief [2], saying that the amount of value in the economy will grow faster than than it is absorbed by the "winners" who are amassing it. I'm not convinced, though.

Why does everyone think this has to somehow be "mitigated?" If we had a level playing field, then winners should win, but on the next round, if they screw up and lose big, then others should get their chance to overtake them. What we have these days is socialized losses--there's nothing even remotely libertarian about that! The problems are self-correcting, but we don't let them ever correct and instead we get these massive industries who run to government for sweetheart deals and to clobber their competitors via regulation.

Why can't I get decent broadband service from a company that is ethical instead of these total shitbird outfits like Comcast?

> Even though I'm a small government, pro-markets kind of guy

There's something at the root of the American psyche that makes us deathly afraid to admit otherwise. Is it a fear of appearing weak, relying on institutions? Is it a fear of being compared to those who are on welfare?

I believe this fear is holding back many of us from discussing solutions in earnest. Social services, and the pervasive hand of the government, has a place in a healthy technologically oriented society in the 21st century. But it must be a place of transparency and low-corruption in order for our institutions to be trusted.

Or we can continue to fervently worship short-term profits over long-term pursuits, and continue to insultingly underfund research.

Your last line pretty much answered your own question.

Most small-government guys (myself included) distrust anything controlled by flawed humans with the power to target and totally ruin an individual at a whim. I personally hate the idea that I could build myself up from nothing and someone could conjure up a story to take my work away from me.

We are just pessimistic when it comes to institutions... yes it can bring great benefit, but you can also lose a great amount. History has shown us many examples of people striving towards utopia and ending up causing unspeakable loss.

And proselytizing our current system isn't setting up a dystopia of its own?

Your question makes the assumption that our current system qualifies as "small government".

The filibuster is gone.. Trump is able to by executive order deport people and change America's course on the world stage.. Net Neutrality is being destroyed and new laws are being made to promote the big players in the market...

That's not small government. That's big government.

Okay then, I must not be sure what you envision as "small government". Did you have any examples in mind? Any examples that allow for innovation, propel a first world standard of living, and protect the rights of its citizens?

Despite the prevalent challenges and maladies afflicting the republic, calling the current state of affairs dystopian is hyperbole.

I said "setting up" a dystopia. You can't seriously see almost every communication being monitored, the middle class being replaced by cheap overseas/automated labor, and the amount of easily buyable lawmakers to be indicative of a sustainable, bright future?

> Is it a fear of appearing weak, relying on institutions? Is it a fear of being compared to those who are on welfare?

Not even remotely, and it's a little presumptive to assign these motives to people who see things differently from you. I just make an effort to play devil's advocate or try and look at the other side. At the same time I know where my philosophical roots lie. I'm anti-big government because I'm anti-concentration of power. Of course government is capable of doing good. But the more power and money you assign to it, the greater the risk of corruption.

> I'm anti-concentration of power

Where do you think power goes in a free market where the rich/powerful are already at a tremendous advantage? Wealth trickles up.

My view on this is that regulations which promote competition are an appropriate delegation of authority from the people to their democratically elected government.

I'm pro-free markets, and monopolists can do as much damage to them as the government can. Government intervention can be justified if it makes markets more free.

I'm not a Sith -- I don't deal in absolutes :)

> I'm pro-free markets, and monopolists can do as much damage to them as the government can. Government intervention can be justified if it makes markets more free.

Every libertarians failure is to not recognize that left to their own devices the "free markets" naturally always consolidate into oligopolistic cartels or a monopoly with poorer outcomes for the consumer.

The supply and demand sides are not incentive compatible and should thus always be regulated (helps with accounting for the externalities as well)

I can't speak for appaters, but for me it's not a fear of appearing weak, but a fear of the power we give government.

>...the pervasive hand of the government...

This is partially what scares me. You mention that our "pervasive" government "has a place in a healthy technologically oriented society" and I agree, but I believe that it is possible to have a government that provides the services we need while have very limited powers.

As it stands most of the gross injustices that are done to the people by large corporations only happen because they have enshrined themselves in the institutions of government so as to give themselves special privileges (local monopolies, anti-competitive practices, etc).

>But it must be a place of transparency and low-corruption in order for our institutions to be trusted.

My ideal government would be afraid of its own people, that way we would not have to trust the government at all, but rather simply get rid of the institutions that did not perform their duties.

Transparency is very important and, as I'm sure many people here understand, as the complexity of a system increases the internal workings become more and more opaque.

So you're in agreement?

Yes, my comment underlines the need for "institutions", but it also emphasizes human nature and the need to make these institutions resilient to being gamed by the greedy.

Google came out of Stanford--there was a lot of academic involvement in search engine research, competitions, and so on at the time. I went to some of the conferences where it all took place. I was startled by how quickly Google rose, though.

I hear you about the "Orwellian" part--this isn't the Internet that I imagined, the one with RFCs and protocols. The worst offender is Facebook. I will never have anything to do with Facebook. I really wish there were more search engine competitors, too. It's important to not have monopolies on information seeking.

This only underscores the point. "Do no evil" Google originated with academics who had figured out some neat tricks for improving search relevance. It was only later when they started investing huge amounts in ad tech that Orwellian Google emerged and they created something nefarious.

I would broaden the statement and say "America has become anti-change, and it's suicide".

For decades Americans were convinced they were the best country in the world, with the best Democracy, working conditions, quality of life, health care, education, infrastructure, etc. etc. Probably, most of it was true.

Unfortunately, for the last 10-20 years America has fallen behind the world leaders in these key areas, but the chant of "We are the best" still rings loudly.

By continuing to think they are the best, Americas have stopped trying to improve, and attempting to improve anything is now seen as "Anti-American".

A country that does not try to improve itself does not have a bright future, and nobody should stop improving even if they are number one (that applies to a lot more than just countries)

Ours is a nation of rent-seekers. It is largely due to the Boomer demographic shift where so many people are headed for or are in retirement.

> so many people are headed for or are in retirement.

I believe that to be true of most OECD countries, though that doesn't make improving things unpatriotic in those countries...

I don't think it's a uniquely American problem. Most government activities everywhere are designed to prevent or mitigate change - because the "changes" within the scope of a typical government agency's purview are usually bad, e.g. FAA "changes" = plane crashes. So a lot of habit against change is built into our society.

But I think before we decide to raise taxes and dole out lots of cash to basic research projects, we should at least examine HOW projects are funded, especially who decides and what criteria are used.

Based on my limited experience in this area -- i.e. looking at grant proposals on various physics professor's desks, and listening to their fund-raising "war stories", it's not the most meritocratic system - it's very connection-driven.

"monopoly profits and tax evasion have enabled Apple to amass a cash pile of a quarter of a trillion dollars."

Since when is ~15% market share a monopoly? Apple was the largest corporate tax payer in America last year (when were they convicted of tax evasion???).

Maybe offering remarkable products is more why they have $250B?

I wonder if they could also claim the title of largest tax avoider.

They paid an average of ~25% tax last year.

Where?

In the countries where the products were sold?

Imagine you pay income tax in your residence country, making web software for global clients. If you sell your product in another country, should you have to also pay income taxes in that country or just the VAT tax for the sale?

I'd like to know more about this since the global companies I have been involved with are all sneakily hiding profits offshore, hiding them from US and UK taxes. They can't re-patriate that money, either, so innovation has slowed. This is one reason why Trump proposed a sort of tax amnesty to get that money back on shore.

Avoiding taxes is sound business. If a public company failed to avoid avoidable taxes, it would have a problem with its board and shareholders. Illegally evading taxes is a crime, and I'm not aware of any criminal prosecution of Apple for tax evasion.

IMO Apple is the wrong example.

If you want to point out the death of innovation and competitive capitalism in the US, the real story is the slow rebuilding of the Bell Telephone and Standard Oil monopolies, and 19th century style financial trusts. 2040 will look like 1910.

You can literally trace the innovation of the internet in the context of the Bell breakup. Within my lifetime we will smash a ridiculous boat anchor on society, unleash a tsunami of innovation and improvement, and then put it back in a jar again. Very sad.

Of course it's the Guardian, so trolling for Apple haters/fanatics is the play.

In Q3 2016, following the Note 7 recall as well as losses for LG and HTC, Apple took 103.6% of the smartphone industry profits, in spite of having only 13.6% marketshare. I have no idea if monopoly is the right word, but it's kinda fucked up any way you look at it.

https://www.macrumors.com/2016/11/04/apple-smartphone-profit...

103%? Are you sure that's what you meant to say?

Not that poster, but yes, the information is correct, because in total, all their competitors made a loss

Insomuch as it's what the analysts who arrived at that number meant to say, yes.

I can't imagine how you're looking at it. Monopoly is not the right word. Successful is the word.

How is it Apple's fault that all the other smartphone makers combined run at a loss?

The article may be referring to 'sweetheart deals' Apple struck with Ireland: http://www.independent.co.uk/news/business/news/apple-ordere...

According to the article, Apple paid an effective corporate tax rate of 0.005% on European profits, which resulted in the EU claiming 11B in back taxes.

Regarding monopoly-status: could you state your sources for the 15% figure?

Lastly, being the "largest corporate tax payer" is irrelevant to the structural criticism leveraged in the article. It is also the most valuable company in the world - I'd almost expect it would be in the top 5 US tax payers, since a large part of its operation is in the US.

That's 0.005% on profits, but they remitted all the EU VAT taxes they collected, and paid all employee income taxes.

If as you say most of their corporate activity is in the US (where they paid over $10B in corporate taxes last year), why should they be double taxed in EU countries where they mostly only retail their products, and pay the associated VAT taxes and personnel income taxes.

You can search around for the specific numbers, but global iPhone smartphone market share has been stable around 12-15% for years now.

Interesting, I am not aware of what happened re the US$13B bill (quoteed this figure in GBP in my prev response). As I indicated, this is not tax aversion but simply "clever" structuring of their EU operation. Paying employees income taxes directly is standard for most EU countries (and the US, too, mostly).

The US$13B is for a 10-year period (2004-2014), so can't be compared to their 10B tax per annum in the US.

Your numbers are correct: according to a number of reports, Apple's market share in the smartphone market range between 11% and 18%[1] and an average of about 14.4% for 2016 [0].

[0] http://www.gartner.com/newsroom/id/3609817

[1] http://www.idc.com/promo/smartphone-market-share/os

Humor me this: why should Apple pay any significant tax to America on a Chinese-assembled iPhone, built from Chinese parts, sold in a Chinese store to a Chinese man, via a Chinese bank, in Chinese currency? America its worldwide tax policy is absolute hubris, thinking it is entitled to a piece of another country's tax stream.

Because the value added is in the brand and the software, both of which are created in the US -- as is demonstrated both in the pricing of equal competitor hardware at a third of what iDevices sell for.

And of course Apple doesn't pay corporate income taxes on most of its profits in China either[1], so the issue would remain even if you could convince anyone that the value creation and tax obligation took place in China.

As another example of the author's premise, Snap spent 800m in R&D in order to make their app more addictive to 18-34.

I cannot see how their investments lead to higher societal productivity and thus more societal wealth. It seems more like a wealth transfer (of advertising dollars), and overall, a way to make society less productive (by wasting its time).

The social responsibility of business is to increase profits - Milton Friedman [0]

Let every entity play its role. For private enterprise, their selfish pursuit of profits under a regulatory atmosphere actually helps society improve on so many levels as a net effect.

That said, issues like this cannot be rigorously analyzed while ignoring the different contexts, changes in costs/benefits and the different periods in the historical development of the country. Thinking these background issues have remained constant will invariably lead to fallacies.

Finally, we may need to think about these matters differently; it's 2017, there are many ways of being innovative without restricting it to your national boundaries or geography. One could easily be accused of tunneling if she thinks that all American exploits of science and technology must happen within the boundaries of United States in this century to qualify as an improvement of American society.

The stage is bigger and the system has become orders of magnitude more complex.

[0] http://www.colorado.edu/studentgroups/libertarians/issues/fr...

This article had one interesting idea: the role of government funding in innovation. But rather than explore and flesh it out, it settled for a series of overgeneralized and unsubstantiated polemics against capitalism, akin to a sophomore political science student who's just finished the manifesto for the first time.

that's fairly common for Guardian opinion pieces these days. They used to be a great source for investigative journalism (and I'm sure they still have some great journalists on the payroll) but in the last couple years they've definitely been sliding further and further into far-left political opinion pieces.

Isn't military spending a type of government funding of innovation?

limited in scope and application.

In the book Sapiens, Yuval Noah Harari makes a pretty strong argument that military spending has a very broad impact.

It always blows my mind that all of the Lambda-the-Ultimate papers were sponsored the Office of Naval Research.

It is, but I am ethically bound to not work on any project that has military funding. In general, engineers and software developers need to make better ethical choices.

How much flexibility do you give yourself?

For example, if a project uses a GPS receiver or GPS data, is that ok?

I think that was fleshed out, but yeah, the article doesn't even need the word capitalist in it. ("capitalist firms" - as opposed to what?)

> the invention of the internet, [...] – were the result of sustained and substantial government investment

Hardly. Anyone who has been in the industry for more than 30 years knows that anyone with 2 or more computers immediately desired to hook them together. All kinds of networks were developed, eventually all merging into the internet. BIX, Prodigy, MCImail, FidoNet, Compuserve, Novell, just to name a few off the top of my head, not to mention innumerable others people invented.

The article is completely one sided, failing to mention such innovations as Ethernet, Xerography and, of course, the transistor itself. If a product consists of innovations A B C D and the government did C, it presumes that C would never otherwise have come about. It's classic selection bias.

Truth

> ...the economy that produced Juicero is the same one that’s creating opioid addicts in Ohio... These phenomena might seem worlds apart, but they’re intimately connected.

I don't think so.

I'm from Cape Cod, Massachusetts, a place that has had such a sudden and dramatic onset of opioid use it was the subject of an HBO documentary[0]. I know many people who have been affected by it.

Cape Cod was never going to get tech jobs. It's a beach town fueled by tourism. Sure, we got a few hundred Uber driving jobs from the tech boom over the last decade, but not much else.

While the author makes some good points about funding scientific research, tax cuts, and so on, I think there are many other important factors that outweigh the performance of the tech industry or "innovation".

[0] http://www.hbo.com/documentaries/heroin-cape-cod-usa

I thought the same thing about that quote. What's fueling the opioid epidemic is a combination of cheap, easy-to-prescribe drugs, doctors who are unwilling to treat chronic pain cases with more diverse methods, and depression. Of course, there's the precipitating factors too: auto-accidents, sedentary lifestyles which make the body more vulnerable to chronic pain, and economic stagnation.

The government funded a tremendous amount of innovation while there was a Cold War with the Soviet Union.

When the Soviets launched a satellite before the US, that launched "The Space Race" where the government put an enormous amount of money into NASA, semiconductor development (for satellites originally?), science education.

Also with the Cold War there was a tremendous amount of weapons development including nuclear weapons and ICBM systems. Supercomputers were needed for nuclear simulations and code breaking etc.

The Internet is an outgrowth of military (DARPA) funding.

Once the Berlin Wall fell in 1991, there was no longer the political push to fund science.

Israel is an example of a tremendous amount of innovation for a country about the size and population of New Jersey (8 million). They are surrounded by enemies and have been since even before the creation of the state.

They have many military advances for such a tiny country. 3 different antimissile systems (Iron Dome -- short range, David's Sling - Medium, Arrow long range) sometimes co-developed with American firms.

Israel was the beginning of the Drone industry and today is #2 after the US. Also #2 after US for cybersecurity. Your Intel processors are designed there and some are fabricated there (the 22nm node plant has been upgraded to 10 nm). Apple has a design group there that designs much of the ARM processors for the iPhone.

Besides military, Israel has since biblical days water shortages. They innovated so that up to 1/3 of their water needs can be satisfied by very large desalinization plants.

Unless the US wakes up about issues with China, we may not be investing as we should. Imagine if the US had the same motivation as Israel for development. For me, someone who is familiar both with Israeli and US innovation (per capita), it is very frustrating to see the government spend so very little on science compared with The Cold War/Space Race, especially today with advances in computing, biology, ....

>Contrary to popular belief, entrepreneurs typically make terrible innovators. Left to its own devices, the private sector is far more likely to impede technological progress than to advance it. That’s because real innovation is very expensive to produce: it involves pouring extravagant sums of money into research projects that may fail, or at the very least may never yield a commercially viable product. In other words, it requires a lot of risk – something that, mythmaking aside, capitalist firms have little appetite for.

My key takeaway from the article.

When you research things, it's not like Sid Meier’s Civilization, you don't get a tech tree.

You might spend years looking and find nothing or you might make the internet.

Corporations won't invest that way, it would kill them.

> Corporations won't invest that way, it would kill them.

It probably wouldn't, but their stockholders would.

Stockholders have massively rewarded AMZN for inventing and investing heavily in cloud computing.

Me, I'd be buying lots of shares in SpaceX if it were publicly traded. I had to settle for buying TSLA shares (up about 50% from where I bought it).

> Stockholders have massively rewarded AMZN for inventing and investing heavily in cloud computing.

Yes, but AMZN is pretty unique in that regard. I don't know why, but AMZN shareholders have put up with things that I don't see any other shareholders putting up with. And it's gone well for them, so I'm definitely not saying it's a bad decision for their shareholders, just that... it's not the norm.

Lots of companies have high P/E ratios, meaning the investors believe in the future of the company rather than next quarter.

The average P/E ratio right now of the S&P 500 is around 25, which, historically, is on the high side: http://www.macrotrends.net/2577/sp-500-pe-ratio-price-to-ear...

Amazon's P/E ratio right now is 178, which historically, is quite low for them: https://ycharts.com/companies/AMZN/pe_ratio, since it often is in the 500-1000 range.

So I don't think the P/E ratio is good evidence that stockholders value long-term planning, since the best example of a company whose stockholders do value long-term planning has a P/E ratio is 7x higher—and has been above 50x higher—than the S&P 500 average.

> I don't think the P/E ratio is good evidence that stockholders value long-term planning

I'm afraid that makes no sense to me. A high P/E is the quintessential play for the long term future rather than next quarter's profits.

> I'm afraid that makes no sense to me.

Ah, because I wasn't very clear.

> A high P/E is the quintessential play for the long term future rather than next quarter's profits.

I agree there. But the question then is, what is a high P/E? We can look at Amazon, who is known for playing for the long term future, and we see their P/E ratio is currently ~180, but usually in the 500-1000 range. So that'll give us a good idea what "high P/E" looks like.

And then if we compare it to the S&P 500 average, which is about 25, but usually in the 15-20 range, is that high enough to qualify as evidence that their shareholders are playing for the long term future? And I'd say, no: it's evidence that they are not. If 200, 500, 1,000 are "high P/E", then 15, 20, 25 are low.

Looking at specific companies, you would get a different picture, but it seems like, as a whole, stockholders of the S&P 500 at least are not investing in the long-term future.

I would think that a company that grew large enough to be in the S&P 500 would not sacrifice it all for the next quarterly results. Hence, I'd expect a larger P/E for the S&P 500 than for the market as a whole.

Then I'm having trouble understanding what you mean when you say:

> > The stock market's quarterly focus

> This idea constantly resurfaces. It's easily shown to be incorrect. If it was true,

> 1. companies would have low P/E ratios

But it looks like companies do have low P/E ratios—the S&P 500's P/E ratios are considerably lower than Amazon (which is company where the stack market does have a longer term outlook), and (as you say), the market as a whole you'd expect to be lower than that even. So when you say:

> Lots of companies have high P/E ratios, meaning the investors believe in the future of the company rather than next quarter.

What companies do you mean by that? Among big companies (that can afford significant long-term R&D spending, which is what began our thread of this conversation) what do you think counts as a high P/E ratio?

You want to believe that companies are slaves to short term results, that they eat their seed corn to do so, be my guest. I'll continue to invest using a buy and hold for decades strategy, which has served me very well.

But corporations did invent and deploy networks before the internet - BIX, Prodigy, Compuserve, MCImail, Ethernet. And FidoNet was very successful, and was the creation of hobbyists.

Yep you can see it right here on hacker news.

Check out the top comment on any innovative idea. It's always some esoteric environmental concern or reasons it can't be done.

Because the announcement posts for these 'innovative' ideas are basically wish lists that rely on fixing some currently unsolved problem, have no plan for funding or deployment, require society to reorganize itself, or would require everyone to take a quality of life hit.

This really comes back to economics if you think about it.

The ZIRP ( zero interest rate policy ) has caused a miss-allocation of capital. There are large pensions and funds that are jumping into investing in startups where in the past it has only been primarily VC firms.

All of these companies are looking for yield because they have to provide a certain return to their clients.

Investing in companies like Juicero is just the natural consequence of this.

I find this is an interesting premise and at least I know I'm not the only one that sees some of the "ideas" out there and remains baffled why they exist at all.

There are so many big issues and tough problems that could be greatly improved or resolved by innovation, yet very few seem to be tackled or addressed. Perhaps because they are hard?

it's easy to agree with this analysis, scoff at the economy and its participants, and move on.

But the reality is that the economy and the participants are reacting in sane ways to an insane regulatory environment. That sounds silly, because regulation has never been more unpopular, but it's stealth regulation in the form of patents, copyrights, and other "intellectual property" laws working hand in hand with licensing and scope-of-practice restrictions that incumbants use to stifle newcomers. Combine that with fallow enforcement of antitrust laws, and it is a disaster.

We need to make the legal system more supportive of competition in all forms, and we should elect politicians who will make that happen.

The catch-22 is the efficacy of lobbying money in preventing this change: incumbants have captured the legislature, and it will be very very difficult to fix.

'That’s because real innovation is very expensive to produce: it involves pouring extravagant sums of money into research projects that may fail, or at the very least may never yield a commercially viable product.' This is a very inaccurate statement.

I challenge the author to drive a car built in 1930, 1960, 1990, and today, and say car companies do not innovate and that any improvements came from the government.

America is the most anti-innovation country except for all those other countries that have failed at innovation time and time again...

This is a terrible article that nonetheless brings up an important point. Silicon Valley doesn't do itself any favors by abusing the term innovation by applying it to companies that sell juicer machines. The original iPhone with the app store was an innovation. It changed the world. Each new model is not.

It's time for a new word. Does evovative work?

How about just "iterative" ? Capitalism is particularly good at iteration and driving something basic into something more appealing to actual customers.

America has become too ______________. (fill-in-the-blank)

This is an example of an article that doesn't have substance with recycling ideas of old stories - Guardian just gets close to its quality suicide.

I feel that this article tells much more about Guardian than America.

Are you serious? This quote is all you need to see:

> Left to its own devices, the private sector is far more likely to impede technological progress than to advance it. That’s because real innovation is very expensive to produce: it involves pouring extravagant sums of money into research projects that may fail, or at the very least may never yield a commercially viable product. In other words, it requires a lot of risk – something that, mythmaking aside, capitalist firms have little appetite for

Meanwhile, America keeps on innovating despite being capitalist imperialist scum!!! What a terrible, blatantly biased article. I'm a big fan of public sector research and funding, but let's be real here. The person who wrote this article should go back to school.

I don't agree with the article, but Mariana Mazzucato makes a strong argument in defense of the critical role government funding plays in entrepreneurial innovation [0].

She also did a talk at Stewart Brand's Long Now Foundation a few years ago [1]. It's worth a listen.

[0]https://en.wikipedia.org/wiki/The_Entrepreneurial_State [1]http://longnow.org/seminars/02014/mar/24/entrepreneurial-sta...

Spot the Juicero owner..

Never heard of it until I heard everybody else making fun of it. But yeah America can't innovate. Everything is doomed. Hide under your pillow. Google can't create a self-driving car! SpaceX can't land reusable rockets! America can't innovate guys!!!

SpaceX benefits from some very patient Nasa contracts.

Yes it does, and you'll note that I support public funding for science as stated above. My contention with this idiotic article is that it implies that America cannot innovate. Even though SpaceX may rely upon contracts for NASA (and idk how much of that is a given), you cannot claim that America is not innovative when it's a private company in the United States building REUSABLE ROCKETS. That is innovation.

Patient contracts?

I mean they have contracts with Nasa and that Nasa have been very patient with SpaceX fulfilling their obligations.

The self driving car relies on computers, GPS, sensors (eg LIDAR) and algorithms. Computers were developed for the military, LIDAR was developed for government-funded atmospheric research projects. GPS wouldn't exist without military funding. The military funded a lot of computer vision research. SpaceX took a lot of government money, too.

And? I don't see how this relates to what I've said? Do these things make America not innovative?

I think there's others problems.

Nobody wants to be the guy that climbs the corporate latter anymore.

And what happened to respect for a guy/gal that puts in a hard days work for a good days pay.

Entrepreneurs make poor employees, too. Always chasing the next thing.

People keep down voting and up voting his like crazy. Just would be nice to know if you disagree with the statements or that the statements are problems. Or that I'm submitting an opinion at all.

Are you asking for a critique? It's a facile analysis that borders on meaninglessly vague and unsupportable, and is riddled with spelling errors.

Some articles to back up my point on corporate ladder:

Redefining Success: The Corporate Ladder No Longer Matters

http://www.huffingtonpost.com/elizabeth-rider/success_b_4952...

Opting Out of Climbing the Career Ladder http://kontrary.com/2013/06/17/opting-climbing-career-ladder...

https://www.weforum.org/agenda/2016/02/are-entrepreneurs-bad...

I'll admit the middle one doesn't have much support online.

> On the contrary: it’s yet another example of how profoundly anti-innovation America has become.

You can ignore any article that uses popular recent news to indicate a trend.

* Point out a recent popular item to ride on its success

* Class-baiting against the capitalists: They don't innovate, and they dodge taxes.

* Frame it as something Trump is working against

It looks like there's an argument like "The government should raise taxes on incompetent capitalists and fund basic research, since the money would otherwise go to juice machines", but I'm skeptical he's actually making an argument: It's more likely he's just telling people what they want to hear so they share his article.

If he was making a serious argument, he would've at least ran it by an economist or two so the reader would have something to follow up on.

I don't see any in-principle problem with using a recent example to illustrate a trend, as long as they back it up with other examples, statistics, research or whatever.

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