Reinventing History

The recent book extolling the old Bell Labs has had a few reviews on Amazon and I was interested to see what folks said. As I had noted in an analysis of the work, namely that Bell Labs was and is a bit over rated, I noted a review on Amazon which stated:

This led to the greenest of recruits learning at the feet of masters like Bardeen or Shannon. Most importantly, you were free to pursue any idea or research project that you wanted, free to ask anyone for advice, free to be led where the evidence pointed. Of course this extraordinary freedom was made possible by the immense profits generated by the monopolistic AT&T, but the heart of the matter is that Bell's founders recognized the importance of focusing on long-term goals rather than short-term profits. They did this by gathering bright minds under one roof and giving them the freedom to pursue their ideas. And as history makes clear, this policy led not only to fundamental discoveries but to practical inventions greatly benefiting humanity. Perhaps some of today's profitable companies like Google can lift a page from AT&T and channel more of their profits into basic, broadly defined, curiosity-driven research.

Gertner's highly readable book leaves us with a key message. As America struggles to stay competitive in science and technology, Bell Labs still provides the best example of what productive industrial research can accomplish. There are many lessons that modern scientific organizations can learn from it. One interesting lesson arising from the cohabitation of research and manufacturing under the same roof is that it might not be healthy beyond a point to isolate one from the other, a caveat that bears directly on current offshoring policies. It is important to have people involved in all aspects of R&D talking to each other. But the greatest message of all from the story of this remarkable institution is simple and should not be lost in this era of short-term profits, layoffs and declining investment in fundamental research: the best way to generate ideas still is to hire the best minds, put them all in one place and give them the freedom and money to explore, think and innovate. You will be surprised how much long-term benefit you get from that policy. As they say, mighty trees from little acorns grow, and it's imperative to nurture those little seeds. 

Let me examine the facts which the reviewer so nimbly ignores:

1. Google can lift a page from AT&T and channel more of their profits into basic, broadly defined, curiosity-driven research Now as I have shown many times ATT charged its customers for the Labs, and profits had nothing to do with it. Profit was a return on invested capital plant. The more inefficient and costly the plant the more profit. It would help if the reviewer had some basic knowledge of whence he spoke on this point.

 2. greenest of recruits learning at the feet of masters like Bardeen or Shannon. Most importantly, you were free to pursue any idea or research project that you wanted, free to ask anyone for advice, free to be led where the evidence pointed  Shannon worked almost alone and the hallowed halls of Murray Hill were off limits to almost all. As freedom, most staff had projects and were limited strictly.

3. Bell Labs still provides the best example of what productive industrial research can accomplish Bell Labs is an example for no reality that exists. It was an artifact of a monopoly. The productive research leads to products that are economically viable in a competitive domain. That was never a Bell Labs concern. Just look at the black dial telephone.

4. One interesting lesson arising from the cohabitation of research and manufacturing under the same roof is that it might not be healthy beyond a point to isolate one from the other, a caveat that bears directly on current offshoring policies Let me consider the Andover wireless plan as an example. The system engineering was done at Holmdel, and some at Whippany but manufacturing was done at Andover. The Bell Labs staff there supported manufacturing.

5. the best way to generate ideas still is to hire the best minds, put them all in one place and give them the freedom and money to explore, think and innovate The best way to generate new and innovative products, things people will buy and use, it to get the best people but in an open and competitive market where abject terror from competitors drives results, results which generate cash flow, positive cash flow. It also destroys bad ideas and bad management. The suggestion made by the reviewer is one found in a dream world lacking any foundation in reality.

Frankly as I had discussed  based upon my experience the intent was to spend as much as possible because it went into the costs which were paid to the monopoly and in addition to lock up patents to ensure the monopoly. And it was Government sanctioned. There was no Darwinian survival of the fittest as we find in the venture and real world. It was a monopolist political world driven by maintaining control and killing off any potential competition. But I suspect the author of this review has no knowledge of the facts, just some idealistic view of what they think reality should have been.

In contrast, Bob Metcalfe writes in the WSJ an interesting contrast and somewhat balanced. Metcalfe states:

Mr. Gertner, besides celebrating forgotten figures and seminal discoveries, wants us to re-evaluate our contemporary assumption that innovation can only be brought about by "small groups of nimble, profit-seeking entrepreneurs." Think big, the author urges. "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."

Mr. Gertner grew up in the glow of Bell Labs headquarters in Murray Hill, N.J., and certainly romanticizes the place. Like many before him, he exaggerates the numerator of Bell Labs while ignoring the denominator. With almost limitless support from its monopoly benefactor, Bell Labs grew to employ more than 25,000 people. So was Bell Labs cost-effective? You will not find the answer in Mr. Gertner's eulogy.

The author also makes the common mistake of confusing invention with innovation. Mr. Gertner credits Bell Labs with inventing the silicon solar cell in the 1950s. If only they had finished the job. Solar energy remains uneconomic today, more than half a century later—invented but not innovated. Likewise, Bell Labs in the 1960s poured its money and reputation into an early form of videoconferencing, PicturePhone, which flopped when deployed.

Brilliantly stated.  They never finished any job I saw them attempt. The solar cell is a great example. They wanted the patents and the rights to keep others out! The idea that one should look at numerator and denominator is critical. There were a few brilliant producers but then again the Bell Labs as the only game in town for those working in telecom sucked up the best talent it could find and in many ways warehoused them so that nothing could be created. It was not until 1982 and the AT&T breakup that the dam broke!

Bob continues:

Mr. Gertner suggests that society would do well to re-create more Bell Labs. But trusting research to corporate monopolies is problematic in two ways. First, their money comes from overcharging customers by using monopoly power. (If you doubt that AT&T was overcharging, ask some old-timers how our mothers urged us to phone home after we arrived safely up at college—"Call, but hang up after letting the phone ring three times"; actually completing the call was too expensive.) Second, a corporate monopoly has little motivation to disrupt a market that it already dominates. AT&T had to be forced, starting in 1968, to let the nascent Internet connect to its telephone network; "Ma Bell" resisted every step of the way. 

 So true! The Internet screw up, the modem, and the list goes on. Bell Labs was in my opinion based upon my experience a bloated machine designed to suck money from rate payers and to block any and all innovation.

The irony of the Metcalfe review is that when one scans through the comments most of those opposing Bob do so based on the assumption Bob is an academic. Bob invented the Ethernet and started and grew 3 Com. Bob is the example of good R&D, not Bell Labs. Those who commented without knowing this just exposed in my opinion based upon my direct experience their gross incompetence in understanding the entrepreneurial world.

But even more chilling is the thread that large centralized R&R, such as Government sponsored R&D is the best way to go. In reality it is the worst. Just look at DoD. For years they had all home brewed designs until the industry outpaced them. The typical cell phone of today is better than any DoD design over the years and at one millionth the cost. It is a shame that so few understand the entrepreneur. It is more of a shame that the often run the country!