

A much-maligned engine of innovation - zt
http://www.ft.com/intl/cms/s/2/32ba9b92-efd4-11e2-a237-00144feabdc0.html

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rayiner
It is quite interesting how much of the really foundational technology that
exists was either funded by the government, by the research labs of monopolies
like AT&T or NTT, or by the research labs of companies that had near-
monopolies in a particular sector (Xerox, at the time, Microsoft, Google). The
things that people hate: governments and monopolies.

In retrospect it's obvious why: R&D takes money, and there is no money in
competitive industries, since competition drives profits towards zero.

~~~
jandrewrogers
In the US the private sector spends several times what the government spends
on R&D and that gap has been growing continuously since the 1950s when the US
government did spend more than the private sector. Now government funded R&D
is a small piece of the pie. Academic R&D has been shrinking in many areas.
The biggest growth area in the US is non-profit R&D foundations that focus on
areas that all three of the other sources tend to ignore.

Where R&D money is focused is a matter of goals and incentives. Private
companies invest in R&D that can add long-term value to their core business
and are unlikely to invest in R&D that in an area where no business currently
exists (perhaps due to a lack of foundational R&D). Governments invest in R&D
to achieve _political_ objectives. In some cases this means investing in
foundational R&D that private R&D can build upon. In many cases though,
government R&D follows fashion because it has little incentive to return
value. It will over-invest in areas with low ROI but great PR value while
studiously ignoring high ROI R&D that does not seem as sexy. The growth of R&D
by non-profit foundations has been in part to address those areas of R&D that
businesses have no incentive to invest in and which are also politically
unfashionable such that the government will never invest in them.

Academic R&D has been faltering for some time partly because its role is being
better served and better funded by the growing investment in private R&D labs
by companies. Consequently, there has been a selection effect where many of
the most productive pure researchers have been absorbed by companies that can
offer compelling research environments and high pay but it is reducing the
average quality of what remains in academia. Importantly, the R&D that is done
in private labs is often treated as trade secrets and rarely published, which
in many domains has created a growing gap where the work being done in private
labs is years ahead of what is being done in academia. I see this all the time
for computer science.

The R&D ecosystem in the US is quite complex. Right now, there is a slow,
large-scale shift toward private R&D. Ironically, this is enabled in part by
how inexpensive and widely available many kinds of high technology have
become.

------
samsquire
Some things are just so big that it is unlikely a company or startup can start
and finish. Society really cannot function without both public and private
contributions. The proportions of each determined by your flavour of politics.

Cases in point are things like the British railway, roads, the NHS or NASA. In
our own industry it is open source software or things like CERN and the
donation of the WWW we enjoy today.

You need both. They tend to flip flop too, we nationalise something because we
think that would be better. Then we privatise it and maybe at some point in
the future we nationalise it again. We cannot seem to escape that both are
necessary for healthy society.

------
nnq
If you want to have expensive ground breaking research done in the private
sector, you basically want superprofitable corporations that have at least
regional monopolies and power to guarantee their long term security via direct
or indirect law-influencing/making/changing powers. If you get to this, then
they'll also need corporate police, corporate armies, corporate intelligence
services etc., that will also have powers over and provide protections to
civilians depending on their corporate affiliation.

 _You basically want the dissolution of traditional states and their
replacement by corporation states - a form of corporate semi-anarcho
capitalism._

...and it doesn't sound like such a bad idea actually. We just need to choose
between _gross incompetence_ (what governments worldwide have shown us they
are capable of) and _pure for-profit maliciousness_ (what corporations showed
they are capable of). We just need a 3rd magic ingredient, maybe something
like a "global karma system" that could help keep the "profit driven
maliciousness" in check. If this magic 3rd ingredient is ever realized, and
corporations agree to become more democratic, a switch to the new system
becomes possible if desirable.

 _Over all this, the basic truth is that in order to take on the risks of
costly research you need to have either:_

1\. guaranteed long term and real power (governments and monopolist
corporations can have this, less for corporations since the landscape is too
dynamic now to guarantee the "long term" part, nor more big Bell and AT&T :( )

2\. a reliable way to turn a significant percent of _any kind of_ research
"outputs" into _guaranteed profit_ (this is actually an area I'm very
interested in and I think I have some ideas, but I'm not sure if I should
just"open source" them or wait until I'll be able to "sell" them...)

------
Game_Ender
It doesn't look like most of HN is in the R&D field, but from the inside it's
obvious why we need government funded blue sky research. Once you get into the
research and science field you realize how many _old_ ideas you are using,
ideas which were just developed because of scientists were advancing the state
of the art their chosen fields.

The fact is, it takes decades to realize the implications of fundamental
breakthroughs in math, physics and chemistry. The long time horizon and
inability to judge the worth of these endeavors at the time means a patronage
model is basically the best bet. It's kind of sucks but we just have to pour
money into research hoping for a better future.

------
chestnut-tree
Medicine is a good example of a field that has benefited enormously from
publically funded research. In countries with nationally-funded health
services, it is often the doctors and healthcare professionals who treat
patients who carry out clinical trials and medical research. Sometimes this
research is done in partnership with private companies. But without Government
support, a huge amount of valuable medical research would never be undertaken.

~~~
seanmcdirmid
Erm, and how is that really different from the USA, which doesn't have a
nationally funded health service? Well, one could argue it might as well be
given that many hospitals are publicly supported, or are even attached to
medical schools, and a large amount of health care is funded through medicare?

And the USA does tend to do much more medical research than anyone else (most
of it publicly funded).

------
setitimer
Government doesn't have to care about risk or tangible profit, and they have a
longer time horizon than most business can afford. Look at the space race, for
example; the potential gains were purely political and the project certainly
stood no chance of ever recouping its costs directly. But the technological
by-products are things we now take for granted and which have spawned whole
new industries.

------
jacques_chester
I'm replying to a review, so this is perhaps addressed in the book.

1\. Couldn't public research simply be crowding out private research?

If you're a company and you can use research someone else paid for ... why
wouldn't you? Once that model is established, what incentive do you have to
spend above your peers?

2\. Is the finding stable across time and different countries?

Public funding of research grew enormously in the 20th century alongside the
growth of the state and in reaction to various wars (hot and cold).

What did the mix look like in the 19th century? The 18th? What did it look
like in Qing China or in late Republican Rome? What differs between Venice at
its peak and the glory days of Islamic civilisation?

3\. Is much research simply more expensive now?

Requiring funds that only super-profitable companies and governments can
muster?

4\. How does research vary between industries and problems?

Some kinds of research are more difficult or expensive than others. Is that
why there's a surfeit of software companies appearing in the private sector
while almost all biomedical companies grow out of government and university
laboratories? How does a small business invent a supercollider?

I guess if I combine all these questions, my underlying question is:

5\. Is the current configuration causal or just a surface feature of the
current background environment, from which it is problematic to extract
generalist statements meant to hold true for all time?

My own suspicion is that some kinds of intellectual output are just not very
highly demanded in a general market. Patronage, whether by medieval nobility
or modern states, is a form of demand that has given us a lot of public goods.

~~~
chris_wot
_1\. Couldn 't public research simply be crowding out private research?_

It depends. There are plenty of examples of research that private companies
don't want to do that the government is prepared to do.

~~~
seanmcdirmid
Governments have the benefit of being able to take on lots of risk and have a
very long term perspective; maybe we'll get to Mars in 2040, a private company
couldn't wait that long and spend that much.

The only companies who have been successful in long term research have had
some kind of market dominance that was eventually tempered. E.g. AT&T Bell
Labs or Microsoft. There are arguments out there that companies shouldn't
become successful enough to do long term research, it doesn't really fit into
a healthy dynamic market. Then you have companies like Google who are very
successful in leveraging publicly funded research (self-driving cars...).

~~~
munin
spacex?

oh right, government funded ...

------
michaelochurch
_What is emerging, then, is not a truly symbiotic ecosystem of innovation, but
a parasitic one, in which the most lossmaking elements are socialised, while
the profitmaking ones are largely privatised._

Yes, this is a real problem, especially in biochemistry right now. It's not
that the intellectual property moves over (because government can't own a
copyright) but that the people do. There are a number of cases where a
researcher in the public sector discovered something and, instead of putting
it into the public domain (where it belongs, since the government paid for it)
he went to work for a pharma company on a 500k+ salary, which is essentially a
finder's fee for IP worth $100M++ to the company.

I don't know that this can be solved completely, but I think that (yes, I am
going to advocate for more government spending) salaries should be raised to
be comparable with, at least, the industry average in the private sector.
(Obviously, government can't match the private-sector high-end.)

I agree with the general insight of the article.

Now, there's a second-order effect that is poorly understood but extremely
important. Startups were more innovative in the 1970s than now. Why? Bell Labs
and Xerox PARC were in their heyday. The public sector paid only slightly less
(10-20%) than private. Academia wasn't the jobless shithole it is today. To
get people to leave their jobs in basic research, companies had to compete on
autonomy and interesting work. The result was that, even to get in the game,
people had to come up with more interesting and better companies.

The general lack of autonomy for technical people in 2013 is why the Zyngas
exist today. There really isn't that competition. Sure, the large tech
companies offer free lunches and one massage per year, but the work is usually
so managed and uninspiring that they aren't putting up much of a fight.

Doubling down on high-autonomy, basic research work, no matter who does it,
government or private, is good for society. It means that the startups that do
claw their way into existence will have to be better.

------
fleitz
The state doesn't actually spend that much on R&D, most of it goes to various
welfare programs and the military. Getting into the whole internet, GPS stuff,
we should just spend lots of money on the military because they fund a whole
tonne of innovation, oddly enough because they receive a whole tonne of money.

R&D is a byproduct of massively wasteful state spending, putting more money
into government will not result in more R&D spending...

I'd hope that an entity that spends 20 to 30 percent of a nations GDP was
responsible for at least a little bit of innovation.

~~~
seanmcdirmid
Governments are most effective when they are competing, just like private
companies; e.g. USA vs. Germany/Japan in WII, USA vs. Soviet Union during the
cold war. These days, we are kind of at peace with countries...even China is
just a big finicky panda bear right now.

We've replaced are bogey men from a well-defined Soviet Union to a bunch of
people in caves who blow things up randomly with IEDs. Well, this war has
given us great drone technology at least, but competing with people in caves
doesn't give us as much.

It would be nice if we could replace our obsession with competing with each
other to achieving hugely ambitious goals like colonizing the moon or Mars.
I'm doubtful this is part of our collective nature, though.

~~~
Sven7
This is the Neil Degrasse Tyson argument. Though I like it, I kind of really
prefer the Bill Gates argument on healthcare and education, and think its the
more important one, that everyone can come together on...not just the nerds.

And I am not as doubtful. Our collective nature resulted in the internet. It
is only as imperfect as we are. But it also represents collaboration between
people on a scale never see before. And that is a cause for hope.

Virality on our social networks can be used, and I am sure it will be used,
for more than just getting Psy to the top of the charts or Obama elected. Its
just a matter of time.

~~~
seanmcdirmid
>Virality on our social networks can be used, and I am sure it will be used,
for more than just getting Psy to the top of the charts or Obama elected. Its
just a matter of time.

Greater errors have been made in the understanding of human nature; think
communism and libertarianism. The technocracy is a bit more reasonable, but we
are still far away from it. We need some crisis to drive radical social
change, and for all the crying right now, we are pretty comfortable.

------
polskibus
Veto sign-in-required articles on hn.

------
graycat
Of course the article is correct about US Federal Government funding of DARPA
and NIH (and NSF) being the major source of research and innovation.

One question is why, that is, why don't private industry, VC funded startups,
etc. do more with applied research and innovation?

My view of the main reason is that private industry, especially nearly all of
finance for the funding (YC is an exception), are not qualified to evaluate
such projects. So, such organizations don't. Likely also hurts is that the VC
limited partners are likely much less well qualified to do such project
evaluations than the VCs and, thus, insist on criteria for VC investment that
rule out evaluating applied research or anything non-trivial in technology (or
making significant use of such evaluations in funding decisions). Instead, the
LPs, and, thus, the VCs, mostly want to see 'traction' in the market.

In the past, that approach worked because a VC could be fairly sure that a
good project that did get some good traction would still knock on the doors of
the VCs for 'go to market' or 'expansion' capital (forgetting that insisting
on only such late funding would reduce the number of projects that did get to
such traction). But now, as in PG's latest essay, can do some information
technology (IT) startups for less than the cost of renovating a bathroom. So,
with such low costs, and likely low burn rate, we should, in time, see some
major IT startup successes that never took equity funding and were just
'bootstrapped' and have 100% ownership by one person.

Likely another reason is that people with the backgrounds to get funding by
DARPA, NIH, or NSF are quite reluctant to pursue startups.

So, net, it looks like there are some especially good chances for Ph.D. degree
holders with money enough to renovate a bathroom to do a startup and become a
billionaire! We will see.

~~~
rayiner
VCs are overwhelmingly finance people, not people with technical backgrounds.
Meanwhile, almost every DARPA program manager, the people who make funding
decisions, has a PhD.

DARPA does a lot of things they won't generate a return, often because much of
what they do can't be productized. They flail around in a field and reveal to
industry what works and what doesn't. Finance guys would never do that--the
near term returns aren't there.

~~~
tankenmate
The other reason that finance people typically won't go for blue sky stuff is
that they need to cash out within 10 years; a few years to select and kick
start investments, 5 years of hard work by investees, then a few years for
cash out, IPO or sale (preferably cash). There isn't the timeframe in there
for R&D.

~~~
graycat
I never said "blue sky".

VCs won't fund research if it's done, written up, in a peer-reviewed journal
of original research, and implemented in software written, tested, timed, and
documented. Period. No research, of any form, any time, in any case, period.
Stop. End.

Instead, VCs, and their limited partners, want to see 'traction' in the
market.

If the traction is from some research, then that's a net negative because (1)
it would be something it might be important to evaluate, more difficult to
evaluate than just routine software, (2) might make the CEO more difficult to
replace, (3) would let the CEO have an easier time telling the Board that they
don't understand the business.

Instead, VCs want a nice, simple, little business, with traction significant
and growing like a weed, in a gigantic market, that can become a company worth
$100 billion, that anyone, even a VC, could understand, run by a CEO who tends
to drool a little and can easily be talked into signing a bad business deal.

"Blue sky" has nothing to do with the situation.

