More Thoughts on Bell Labs

The Idea Factory is a well written presentation of what happened in Bell Laboratories in its early and middle lifetime. The author has captured the view from within the Lab and has presented a history that is in many ways presented in a manner in which the Lab people would have wanted it presented. His conclusions however are subject to significant debate, if not being downright wrong.

I write this review having heard the author present his work in Madison, NJ to an audience almost totally filled with hundreds of former Labs staff and also as one who spent a great deal of time at the Labs from 1964 through 1972, while going back and forth to MIT, plus over fifty years in the industry.

The author presents the often told tales of Shockley and the transistor, Shannon and information theory, as well as all the management types who formed, directed, and molded the Lab like Kelley and others. Many of these people I knew firsthand and as any observer the view is all too often colored by one’s position at the time.

The driving presumption of the author is best stated in his introduction where he says:

“Some contemporary thinkers would lead us to believe that twenty-first century innovation can only be accomplished by small groups of nimble profit seeking entrepreneurs working amid the frenzy of market competition. Those idea factories of the past, and perhaps their most gifted employees, have no lessons for those of us enmeshed in today’s complex world. This is too simplistic. To consider what occurred at Bell Labs, to glimpse the inner workings of its invisible and now vanished “production lines” is to consider the possibilities of what large human organizations might accomplish.”

This conclusion is frankly a significant over-reach, if not just out right wrong, since it is posited without any basis in fact contained within the book. The author never really looks at the many other parts of the Lab, the tens of thousands who worked on miniscule parts of large systems. The R&D group at Murray Hill was but a tiny part of an enterprise whose overall goal was to ensure the monopoly that AT&T had been granted by the Federal Government and to maximize the profit made in that monopoly.

To understand one must recognize that in the old Bell System profit was defined as a return on investment, meaning the invested plant. Revenue thus equaled expense, plus depreciation plus that profit construct; namely the company could charge whatever it wanted to subject to the regulators limited control. The game was thus to maximize profit, which in turn meant to maximize the invested plant, and not to be maximally efficient in a competitive sense, there was no competition. Understanding the ground rules of the old Bell System is essential to the understanding of Bell Labs. No other company, save perhaps the power utilities, functioned in such a manner. This was the basis of the world view of the Labs, a world of monopolistic control.

But the “creative destruction” of the free market did begin to surround the Labs. It surrounded the Labs in the areas in which the author appears paradoxically to make them most successful. Let me discuss just three examples.

Satellite Communications: The author speaks glowingly of Pierce and his vision of satellite communications. Yet Pierce wanted dozens of low orbit satellites, apparently driven by his desire to have low time delay for voice. He wrote a paper which appeared in Scientific American proselytizing the idea. Based upon that proposal, COMSAT was formed and capitalized based upon a need for this massive investment not only in space segment but also in the complex tracking earth stations. A few days after the COMSAT IPO Hal Rosen and his team at Hughes launched Syncom I, the first synchronous satellite. Within weeks they launched Syncom II. Synchronous satellites provided global coverage with only three satellites, not the dozens demanded by Pierce’s world view. COMSAT was then off with its own satellite, Intelsat 1 and its progeny using not Pierce, but Rosen. Somehow this minor fact is missing from the book.

Digital Switching: Fred Kappel was the Chairman of AT&T in the 60s during the time of the development of the first Electronic Switching System, the No 1 ESS. This system was developed by people such as Ray Ketchledge and others. They had deployed a computer based system, albeit still with analog mechanical switches called Fereeds. Fereeds were small mechanical switches that clicked and clacked. The Fereeds made the new computer elements be the dog still wagged by this old technological tail cross-connection technology. Kappel wanted an all-digital switch and the Labs kept putting him off. But at the time he had another card up his sleeve. AT&T also owned Bell Canada and their Bell Labs entity called Bell Northern Research. So off he went and got them to build the all-digital switch. The entity doing it became Northern Telecom, NORTEL. NORTEL subsequently became a major switch supplier of their new and better switches to the Operating Companies. Thus, in a true sense, Kappel used the entrepreneurial spirit of the Canadians to do what the mass of people at Bell Labs would not do.

The Internet: Now in the mid-1970s the ARPA net was in early development and some of the basic principles were evolving from Government, Academia, and a bunch of small start-up companies like Linkabit and BB&N. ARPA, the DOD advanced research arm had an office called IPTO and they wanted to expand the Internet more aggressively using the public telephone network. Yet since AT&T was a monopoly they somehow had to co-opt AT&T to agree. A first step was to go to a meeting at Murray Hill and seek their support. So off go a couple of folks from ARPA and in Murray Hill they met the standard Bell System meeting of a few dozen people. The senior person, a VP I was told, began to lecture them that if they wanted this accomplished just send them the money and they would deliver what they felt was the correct design. The ARPA folks walked away somewhat aghast and immediately reached the conclusion that they would develop what became the Internet, totally independent of AT&T. This was, in a sense, the final straw since it sowed, in my opinion, the seeds for AT&T's ultimate destruction, not the Judge Greene breakup.

The author, in my opinion, misses many other R&D entities which had a significant role in the evolution of technology, oftentimes well exceeding Bell Labs. Let me discuss just a few:

MIT Rad Lab: At the beginning of WW II Vannevar Bush set out to establish a center for R&D focusing on radar. Bell Labs had tried to capture this jewel but Bush wanted a more innovative and competitive center and as such he chose MIT and from that came the Rad Lab. The Rad Lab was composed of engineers, but they were drawn from many places and the best part was that when the war was over they went back to those many places. The Rad Lab designed radar but radar had the same elements as communications, and specifically digital communications. Thus from the Rad Lab came such innovations as the modem, designed by Jack Harrington, to interconnect signals from distributed sites. From the Rad Labs came rapidly effected engineering systems, and the terms system is critical, because the parts all worked together. From the Rad Labs came a set of book, the Rad Lab Series, which became the bible for engineers who entered the wireless world and the digital age. The Rad Lab was a petri dish that bred hundreds of engineers who went forth and created the core “startups” in the Cambridge 128 areas and also in Silicon Valley.

DoD Design Companies: It is well known that many of the transistor companies were driven by the demands of DOD. Also many of these same types of companies in Silicon Valley and in the 128 Corridor were driven by DOD money as well. Groups of engineers educated from the Rad Lab type entities of WW II came out and started small companies fed from the DOD demands in those days. It allowed for many bright engineers to experience the “startup” albeit at the Government trough.

This this book has strengths and weaknesses. Its strengths are:

1. A well written story of some of the key players in Bell Labs.

2. A well described evolution of the development of the management techniques.

3. An excellent discussion of some of the major personalities in the R&D world at the time.

Its weaknesses however should be considered when taking the author’s conclusions to heart. Namely:

1. This is truly a tale written from the perspective of Bell Labs. It totally fails to consider the competitors and thus when reaching his conclusion the author does so without any basis in fact. He totally ignores the weaknesses of such a system as Bell Labs and moreover he fails to consider the alternative entities such as the Rad Lab and its offshoots. In my opinion this is the major failing of this book. It would have been much more credible and useful if the author had looked at Bell Labs in the context of the total environment; the strengths and weaknesses and the competitors and alternative models of research.

2. The monopolistic structure of AT&T was a major driver for what people do and why. The issue of return on investment being the profit, and not revenue less expenses, is a true distortion of what is done and why. This idea of a world view is a formidable force. It molded what the Labs and AT&T did and why they did it. The author seems to be totally devoid of any notion of its import.

3. There were many failures at Bell Labs, and those failures were never truly perceived by those within the system, and it was this blind spot that in my opinion also led to its downfall. The author missed a great opportunity to follow up on this. Instead we see all these Herculean minds making great successes and yet the system collapses.

4. Bell Labs was enormous in size and scope at its high point. I had spent time at Holmdel, Whippany, Indian Hill, Andover and even a brief stint at the remains of West Street. Yet the focus is on Murray Hill and a small part of a small part. This is especially disturbing in light of the author’s global conclusion which is reached without a single discussion of these areas. To do Bell Labs justice one must perforce covers these as well. The Pierce, Shockley and Shannon tales are told again and again, but the efforts of the hundreds of thousands of others over the decades are still silent. In the presentation by the author before a mostly former Ball Labs group it was clear that my observation on this point had substantial merit.

Overall there is a significant story to be told but this author does not accomplish it. In fact the author’s statement denigrating the entrepreneur and the process of “creative destruction” is made without any attempt to understand the difference between a monopolistic structure and competitive markets. Perhaps if we had kept the old paradigm we would still have our black rotary dial phones.