A paradigmatic
example is the American Telephone and Telegraph Company (AT&T) and
its Bell Labs, a story meticulously recounted by Jon Gertner in his 2012
book The Idea Factory.
The research, discoveries, and products that emerged from this single
entity are astounding: not only reliable relays and switches for
landline telephony, but also radar, lasers, the transistor, the
integrated circuit, the fax machine, satellite communications, Shannon’s information theory,
the theory of computation, six sigma quality control, and even cosmic
microwave background radiation. All of this happened inside a corporate
behemoth, which could afford the lab thanks to its monopoly on local
telephony and on the equipment used to provide the service, which was
manufactured by AT&T’s subsidiary, Western Electric.AT&T’s monopoly
position was always controversial in the competition-minded US
regulatory system. So the company had to earn the right to be a
monopolist by constantly improving its service and using its research
power for national purposes such as military defense. To renew its
corporate charter in 1956, it even had to agree to license all of its
old patents royalty-free and to license all new patents at low cost. If
AT&T had to be a monopoly, it had to be a monopoly that benefited
society at large, not just its shareholders, through breakthrough
research. ...As societies consider their R&D strategies, they must find ways to
coax their largest corporations into a more AT&T-like bargain. If
citizens are to tolerate or even support these companies’ power,
companies must use it in ways that bring outsize benefits to the rest of
society. Their R&D budgets, their patent history, and their
innovations are part of what they should brag about in public.
I reviewed the book by Gertner and in that review detailed his many fallacies. AT&T ran Bell Labs to maximize the profits of the Bell System, NOT to advance technology. Remember that AT&T had profit based on a percent return on invested capital. Its operating costs were guaranteed in its rate base. Thus to maximize profit you built the most inefficient and capital intensive system possible! I know because I was there. As to Corporate R&D, the author should look. Corporations all too often "buy" new ideas, ideas generated in the cauldron of a free and open R&D environment. Look at the pharma business. Yes they do some R&D but they also but successful start ups. Look at immunotherapy and CAR-T cells as an example.
It is not surprising that a Harvard Prof would opine in this manner. One must have done something real to understand how the system functions. In my opinion, reading third hand material, and fallacious analyses, does not get you there. Socializing companies is not the answer.
Posts
