The death of corporate research labs

A big reason Bell Labs was created and perpetuated was because AT&T feared being broken up. Bell Labs was effectively a PR vehicle they used to show the US government that they were giving back to the community, and an excuse to continue operating as a de-facto state-sanctioned monopoly. Today's toothless FTC and DoJ don't really inspire that kind of fear.

Source (sort of, paraphrased) - This is a big theme of The Idea Factory which describes the heyday of Bell Labs.

(Edited to further develop my thought)

Aside from the issue you mentioned, the article seems to be making the claim that we have less innovation today. Which just seems like a ridiculous claim to me.

It also mentions “pervasive short-termism” as an obstacle. It might be in large public companies, but it’s certainly not in the private equity markets. Innovative companies have access to huge amounts of capital, and can stay unprofitable for such a long period of time that many people think we’re in a bubble. Multi-billion dollar valuation and “may never be profitable” is perfectly ordinary these days, and certainly doesn’t lend any credibility to the authors argument.

Imagine if Alphabet was broken up, Google search can still afford to run a research lab, as can youtube.

The problem I think is how easy it is for large companies to acquire smaller companies. It's how they expand or enter a market, they refuse to be bothered to bootstrap a new org-unit. They just devour smaller, innovative and creative companies. Look at Google, they couldn't be creative and patient enough to compete with youtube so they gulp up youtube. It's the bigcorp M.O.

So why bother with R&D when you can just buy a smaller company that does R&D, tests the market and builds a brand for you? My answer: you will suffer from brain drain.and reputation loss,when you buy a smaller company,consumers assume that brand is now dead. You become a cemerery of dreams and ideas. You become an IBM,HP,Xerox and AT&T. Once the damage is done it becomes nearl impossible to recover from. I like IBM as the best example, they are doing superb amounta of innovation even today but look at all their initiatives lack any traction or competitive edge. They have a ton of smart people working on brand new areas of tech like quantum computing,but their reputation and overall culture has not been great. They've been declining consistently. Look at yahoo, yahoo!! They had legitimate means to compete with google toe-to-toe,they relied too much on aquisitions as did Verizon that recently aquired them for a meager $4B.

In the end I blame all this on how publicly traded companies prioritize quarterly profits as opposed to multi-year growth. Acquiring bumps up the stock value for a while, spending billions starting from scratch competing or developing a new concept is risky so stocks go down.

It's difficult for academic labs to keep up, actually.

Whilst modern economics and the startup model makes it easier for companies to let startups do the actual idea testing (and then buy up the successful experiments), there's a ton of companies that are still driving entire industries with their corporate-funded research.

We should also probably note that a lot of the funding for some very successful academic labs comes from these large corporations as well.

I think we (I, maybe) default to the mistake of thinking in terms of "one big systemic explanation." Ultimately, something like investment in or success at innovation doesn't follow strict rules. The factors that go into it tend to be local. Any practicable "Theory of Innovation" is likely to be true locally, at best.

A few years back Neil Degrasse Tyson, advocating for a re-funding of the NASA space shuttle, made the argument that private companies will never pioneer space exploration. Mars missions and such. He had Elon in his sights, but also others who were starting to "invest in space" at the time.

It was a good argument. It was logical, consistent with 50 years of space exploration experience and parsimonious with analogies from other industries, history, etc.

Neil was also wrong, and I think he'd agree to moderate that argument significantly today.

In the monopoly position they are no longer concerned about competition so don't need to worry about their position ever more. Unlike startups which are constantly in survival mode so basic research with long term benefits is like the last thing they would spend money on.

Long term basic research in academic settings is also not very viable. It seems to favor vocal people with grant hunting skills instead of true researchers. Also academic environment seems to diverge away from practicing of science to more like practicing of religion by studying and promoting either topics completely ungrounded to reality or promoting outright politicized topics.

Monopoly companies on the other hand have a good track record of amazing research which is still practical but with long term vision which can have great benefits to the entire society.

So monopoly companies should not be broken up but forced to allocate percentage of revenue to this research like the examples of Xerox PARC and AT&T Bell Labs. If the companies have the privilege of no competition they should pay heavily for it.

Also since monopolies often fall into caregory of too-big-to-fail companies necessary for economy they should be paying a bailout tax - because you know they will need bailout money in crises, so better to fund it upfront instead of being so surprised that we need bailouts every time the market wobbles.

Monopolies are not very well studied by political and economics circles - everybody fears them and think of them as bad. They are inevitable anyway - infrastructure networks can't be form a competition unless a new technology appears. Maybe monopolies have a natural role in society.

Embrace, not fear, the monopoly. But understand it is a monopoly and you grant it expensive privileges that they would otherwise use to extract rents from the society. Let them pay for the privileges appropriately and you can form a nice symbiotic relationship with monopolies.

Maybe we should not hold on to the bureaucracy patents bring. Especially considering in some countries international patent are used as recipe to copy innovations.

Tesla has moved their patents into open source because they are under the opinion that competition is won by attracting the best engineers.

> Elon Musk: "After Zip2, when I realized that receiving a patent really just meant that you bought a lottery ticket to a lawsuit, I avoided them whenever possible."

https://www.tesla.com/en_GB/blog/all-our-patent-are-belong-y...

Could it be the other way around? That government-supported research in the universities had (at least to some degree) the effect of crowding-out the corporate labs? I mean, if the government is going to foot the bill, then why would I want to spend my own money on it?

Only on HN would someone argue that we've overrated the significance of the invention of GUIs because it didn't make the company that invented it enough money.

FTA: >Arora et al point out that the rise and fall of the labs coincided with the rise and fall of anti-trust enforcement: 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. The more relaxed antitrust environment in the 1980s, however, changed this status quo. Growth through acquisitions became a more viable alternative to internal research, and hence the need to invest in internal research was reduced.

A good question would be, although there was a decline in these kinds of research labs, did the market make up for that decline though the current strategy of investment in entrepreneurs and startups?

Of course, it's also possible to run a research lab poorly and do nothing of value, naturally I don't know anything about your experience.

I think this is part of it. But als,o there were just so few companies who were doing serious R&D for technology. Breakthroughs were new and unique. These days there are so many different companies constantly innovating that breakthroughs are the expectation/norm.

Under different leaders my lab flip-flopped from "blue sky, do what interests you" phases to "we need to focus on value" phases.

Neither produced anything revolutionary. But the blue skies phases did produce some useful work.

Research is a risk. Funding it is like gambling. Don't bet more than you are prepared to lose.

The silver lining is that since doing R&D is necessary for progress and innovation, it will happen elsewhere. I foresee that the majority of R&D exercises will move to university and industry sponsored research will be the norm rather than the anomaly. This is also fueled by the fact that graduate students' stipends are much much lower. You did mention that in Bay Area the researchers are paid half of the FAANG senior engineers. In most developed countries, the salary of university graduate students probably a quarter (4x lower) of the company's researchers. The developing countries has the worst by being paid 10x lower than the BAY Area researchers.

It's certainly true for PARC, which owes its success in large part to the ARPA research community that preceded it. Many of the same people from that community came to PARC when in the beginning, as government funding was drying up elsewhere

the fundamental technology of modern pharma is the same as the one of cosmetics company - marketing. To convince people that this lipstick or anti-cholesterol drug matches their lifestyle the best, or even more - to sell people on the lifestyle of that lipstick, that drug, etc.

Since the market size/fit/price sensitivity is extremely predictable and there are so few customers to negotiate with (insurance companies, nationalized healthcare, medical purchasing groups, etc.), this is far more efficient for pharmaceutical companies than having a broad and risky drug discovery pipeline. Instead they acquire early and mid stage biotech companies with promising pre-clinical trial results or phase 1/2 successes - in essence externalizing the risk of early R&D even further to academia, venture capital, private equity, and retail investors. With the increasing availability of easy capital of the last few decades, this has become even more of a win-win for investors and the pharma giants recently.

L’Oreal also does research in things like methods to regrow human skin/hair, which aren’t on the same level as cancer treatments, but they do involve clinical trials and medical research. Hell, even something like launching a new facial moisturizer requires testing akin to clinical trials.

Aside from that, Emma Walmsley wasn’t CEO at L’Oreal, and she left there in 2010 to join GSK, where she worked for 7 years before being promoted to CEO in 2017. It’s not as if she went from being some business bean counter straight into being the head of GSK; she had 7 years to build GSK domain knowledge before taking the helm.

Further reading: https://duckduckgo.com/?q=ceos+dont+matter&t=h_&ia=web

I'd say a CEO's job is to hire someone who is qualified to make those decisions, and to make sure there's enough money to keep the lights on so they can do that job.

In that respect, running a company like L'Oreal isn't so irrelevant.

Not saying your broader point is wrong though. Someone needs to have a vision for the future, and I'm not sure you can really have a strong vision without having been through the trenches yourself.

Merck's CEO is a lawyer.

> they are kind of _forced_ to do research in one form or another

Modern pharma companies spend more on legal and marketing than they do on R&D [1]. Valeant and Michael Pearson are emblematic of that horrifying trend.

MBA types and McKinsey alums have very different priorities than most hackers/researchers/builders, and it is their priorities that are driving investment decisions these days. That really needs to change.

[1] https://www.bbc.com/news/business-28212223

> ... firms in the life sciences such as Pharmacia, Lilly, Bristol Myers Squibb, Pfizer, and Amgen significantly increased publications. In the case of Pfizer and Amgen in the 2000s, this increase in publishing kept up with changes in R&D expenditures. One key feature of the pharmaceutical industry during this time period was the strong merger activity. However, comparisons with other sectors that also experienced strong merger activity suggests that the publishing behavior of firms in the life sciences was not simply an artifact of merger activity.[1]

[1] https://static1.squarespace.com/static/593d9b08be65945a2e878... Page 29

I’d love for a billionaire to offer 18-25 year-olds, $25k for a summer to explore new projects.

You could fund 1000 kids with promising projects for $25 million.

If the next great innovation will start as a toy, we need to encourage people to make more toys.

This sounds like a form of suvivorship bias. If you know which research pans out it wouldn't be research. You need to also include the cost of research done by other companies that led to nothing or something less impactful.

Why did it fade, though? AT&T was able to fund Bell Labs when it still had a monopoly over the telephone market. The article claims that antitrust laws were relaxed in the 80s, but AT&T was broken up in 1982 (https://en.wikipedia.org/wiki/Breakup_of_the_Bell_System). This break up lead to increased competition and innovation in telecom, but it did come at the cost of Bell Labs losing funding until eventually being spun off into Lucent.

Peter Thiel argued in the book Zero to One that only monopoly (or pseudo monopoly) businesses can afford to fund surplus salaries and corporate research labs that cost billions of dollars with potentially little or no gain for many years. I would argue that if a corporation exists in a competitive industry, their margins are driven too low to fund basic research.

Also note: even in the U.S. corporations fund a good chunk of basic research in academia: https://www.sciencemag.org/news/2017/03/data-check-us-govern...

The reason it appears rare is because funding research on the assumption it might be useful in more than 20 years from now is extremely wasteful. Companies don't work so far ahead because the risk of just going down a dead-end for half a lifetime is very, very high. In academia that doesn't matter because people are rewarded merely for researching novel things, in the real world people are rewarded for doing things that are useful.

It matters. For every DNA you can cite, others can cite dead end branches that despite decades of research have gone nowhere and probably never will. In CS, how many programmers are using Haskell every day? It's been in development for 35 years yet virtually nobody uses it - the new languages that gain traction (Rust, Swift, Go, Kotlin etc) invariably come from corporate R&D labs, and outside of a few bits of useful syntax borrow little from academic research languages. Even Haskellers have admitted now that lazyness was a dead end, new FP langs like Idris don't have it. Practically the entire field of PL research was swallowed up by FP and continues to be dominated by that paradigm (e.g. dependent types), despite the vast majority of PL users being disinterested in them.

Computational epidemiology. It's been researched for >20 years yet the models are always wrong. There are private sector epi models, but not surprisingly little work is done on them because there's obviously a missing piece, and developing huge and insanely complex simulations (e.g. the 15,000 LOC monster Ferguson produced) is obviously a dead end.

String theory. How much time has been sunk into that? Not a single testable prediction.

And in biology. You know, one biotech firm found 9 in 10 papers don't replicate. Papers professional labs can't replicate is not "useful in 20 years". That's "not useful today and never". People were selectively breeding for many centuries. Agritech firms would have eventually figured out the structure of DNA if Watson and Crick hadn't.

Meanwhile we tend to take for granted all the long term R&D projects the private sector does because it's much better at finding useful outcomes quicker. It doesn't need to wait 20 years to find products out of the research it does, and that's good!

I’m surprised you are the only one mentioning this. You change the rules of the game, you change the game.

This is complete nonsense. This logic applies well to stock and bond valuation, where you have armies of traders optimizing from public information. It's a pretty frictionless market

It's like telling a parent their kids can't outperform the market at scale in science. Of course they can. They just can't outperform the market at scale in math, athletics, leadership, foreign languages, science, and everything else all at the same time.

In virtually all other domains, you have better organizations and worse organizations. I've been in organizations that do R&D brilliantly, and ones that do it horribly. Did the ones that do it horribly die because of market forces? No. They did other things better.

An organization has many pieces: R&D, marketing, branding, advertising, legal, engineering, sales, strategy, finance, logistics, etc. Most organizations I've worked at were really good at maybe one or two of those, in most areas, followed industry best-practices, and were pretty bad in a few.

I can promise you that MANY people can outperform the market at scale in relationship to R&D outcomes. We just can't outperform the market at scale in ALL of those areas at the same time. Organizations and individuals have areas of focus.

Reminds me of this. https://www.smbc-comics.com/comics/20101209.gif

https://research.google/

The main issue with corporate research is that it's not easy for them to capture the output; it very quickly leaks into the public domain, despite patents. So why bother?

This is better for a lot of reasons, obviously, it makes it easier to justify funding the projects. But it also ensures that the researchers truly understand the nature of the problem they're solving. Seeing actual translation queries on Google Translate helps direct the next piece of MT research towards what kind of things people really use the tech for. Building actual big data systems helps train the researchers in how to work with huge data sets and puts them on research paths they otherwise would have been unable to explore.

Basically it recognises that a hard division between research and practice doesn't really make sense when working at the cutting edge of technology. You want the constant feedback from real world practice to guide the theory.

Even disregarding the product reasons, research often makes these companies look good to both a technical audience and sometimes to politicians who value "innovation".

Eventually, though, once a company gets large enough, it needs to diversify in order for it to not be totally dependent on one revenue stream, lest it find that stream disrupted in the future. Apple used to be strictly a personal computer company; now it sells not only computers, but it sells smartphones, tablets, headphones, smartwatches, and other consumer electronics, as well as provides services for a fee. Google has a lot of activities, and Facebook has been branching out into VR through its Oculus acquisition.

Having a research lab could be helpful with exploring other areas that the company could branch out into.

They could stop working on their products but they wouldn't last long. The consumer tech world changes rapidly and is fiercely competitive.

To research new infrastructure technology to reduce expenses or simplify operations (making outages less likely, feature development easier, etc.)

To get better at targeting ads by investing in data science/machine learning/AI

To create new products through which to serve ads, reduce CAC, or build goodwill or diversify

To generate publicity and press for recruiting purposes, public perception, etc.

To acquire patents or to genuinely just try something new and figure out how to use it later

https://www.nytimes.com/2019/11/26/business/mariana-mazzucat...

But at the same time, we've seen a decline in corporate R+D since the start of the neoliberal era - the article mentions that this started at around Nixon's time. This is the period of time where Milton Friedman's ideas started to gain widespread acceptance:

>“there is one and only one social responsibility of business– to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game,”

Many organisations have taken the idea of "profits over everything", and interpreted it as "quarterly profits over everything". R+D labs don't result in quarterly profits. Much of the research ends up being profitable years down the track. So corporate R+D is killed off.

https://ec.europa.eu/eurostat/statistics-explained/index.php...

The challenge I'm talking about is papers, specifically the game of publishing. I feel like PhD students spend more time in optimizing for publications than doing actual research. There's an obsession with the number of papers so everyone is trying to eek out a paper for every semi-failed experiment, overfitted model, or unfinished prototype. No one wants to throw away effort on something that basically failed, so they're trying to find the perfect narrative, frame their results just so it looks like they're good, or slice and combine it into something submittable. Every deadline is worth submitting to, the number of selective conferences is growing, and there's incentive to "get on" another paper as a co-author (which means building collaborations, helping out, editing).

For each paper, there's months spent writing, giving and receiving feedback, making figures and formatting. Each submission usually requires some change to the format and language, so upon rejection, the paper is edited and targeted towards the next conference. Then there's the submission game of proposing reviewers, choosing the right track or subcommittee, interpreting reviews, writing multi-page rebuttals, editing and getting feedback from co-authors about the rebuttals, and in the best case a month later, preparing the camera-ready version, the back-and-forth with the publisher, and finally preparing and practicing the conference presentation.

So before great research can truly come out of universities, I think publications need to be deemphasized. This could be a simple norm like judging researchers on their best 3 papers for faculty hiring and research awards. In turn, that would reduce paper submissions, increase paper acceptance rates, and finally -- leave more time for actual research at universities.

You're partially right if the argument is "basic research" = less applied fields / "purer" math, but even there Microsoft research has been a significant player in the TCS and optimization community.

A lot of the current research done at universities is also funded by these organizations, either via grants (monetary or equipment like from Nvidia) to research labs, or scholarships and financial support to students. A large part of AI advancement in the past few years have been precisely because of the amount of effort these firms have put in (along with a lot of others, they are just the most public).