> In the 20th century, U.S. companies put their excess profits into corporate research labs. Basic research in the U.S. was done in at Dupont, Bell Labs, IBM, AT&T, Xerox, Kodak, GE, et al. This changed in 1982, when the Securities and Exchange Commission ruled that it was legal for companies to buy their own stock (reducing the number of shares available to the public and inflating their stock price.) Very quickly Basic Science in corporate research all but disappeared. Companies focused on Applied Research to maximize shareholder value. In its place, Theory and Basic research is now done in research universities.
I'm not seeing how you get from share buybacks to a shift in priorities in corporate research. If there's a fundamental reason why it can't be done now how it was before the 80's it's not that.
Nothing against research universities as good stuff does occur there, but it just seems like it was such a a huge loss seeing those corporate labs disappear. I think it helps to have scientists and engineers closer to the problem and who don't have to spend a huge amount of their time writing grants and training grad students.
And you can have a career track that normal people will actually want. The whole phd -> postdoc -> (maybe) tenured professor thing is such misery that I never even gave it a thought as a career.
The article doesn't mention that Bayh-Dole made it legal for a university to exclusively license a patent generated by a government-financed researcher to a corporation.
Prior to this, if a corporation wanted to have exclusive rights to basic patents, they'd have to run their own private research labs to generate those patents. Prior to Bayh-Dole, university inventions were patented but there were no exclusive licensing deals. This means no competitive advantage; anyone can use license the patents (I believe any US citizen) before Bayh-Dole.
So corporations largely stopped funding private research labs like Bell and instead entered into public-private partnerships; on the academic side we saw the rise of the shady enterpreneurial researcher whose business plan was to use government funds to generate patents (not uncommonly based on fraudulent research) which formed the basis of a start-up which was sold to a major corporation.
The fix is simple: patents generated with taxpayer dollars at American universities should be available to any American citizen for a small licensing fee; if people want exclusive rights to patents, they need to put up the capital for the research institution themselves, as was the case with Bell Labs. Practically, this starts with a repeal of Bayh-Dole.
Because before buybacks there were dividends. Did the difference between buybacks and dividends really make the difference between doing basic research and not?
Yes, dividends provide higher levels of exponential growth long term for an otherwise steady state company.
Convert 10% of a stocks value into a dividend and you pay taxes on that before you can buy more stock, but someone who keeps buying stock sees an exponential return. (You keep getting a higher percentage of the company over time.)
A company buys back 10% of its stock functions like a dividend + buying more stock in that they own a larger share of the company because the government isn’t taking a cut of your dividend.
On one hand, sure. They're able to make an informed decision to maximize return to shareholders.
On the other hand, a ton of amazing inventions came out of that system which created entire industries that went on to turbocharge the economy and create millions of jobs. I can see how someone may feel that a company being able to inflate it's stock price more is less useful to humanity and not worth the trade.
There may have been other reasons as well for the collapse of corporate research like changing tax rates, or maybe we were just in a golden age (1940s-1980s) as new advancements in physics and materials science allowed for a rapid amount of discoveries and now we're back in a slower period.
Note the "maximize shareholder value" aspect.
That's the essential driving force behind business since then: The Friedman doctrine.
Now consider the choices a company makes when executives hold the Friedman doctrine as orthodoxy.
Put money into basic research that might generate shareholder value in some unknown time,
or buy their own stock back and pump up the price?
Ok, then why do they get affected by funding? The truth is, today there is not a scientist, artist, researcher or writer who is not driven by funding. The era for curiosity-driven science is was over a long time ago.
The direction of research or science is all driven by funding.
You can't stop innovation across the planet, you will lose control over time as adversaries continue to innovate and subsume antiquated control structures.
Which is exactly what our system encourages. You don’t need to think beyond the next quarter / election cycle. You’re only in it to extract as much wealth in the short-term as possible and secure your chair before the music stops playing.
Yet it’s a mistake companies and societies repeatedly make, because human brains are wired for zero sum games and paranoia. When you have it, the instinct is to clutch and guard and hoard not grow and expand.
When a company or a society is threatened the usual response is to double down on things that accelerate decline like killing novelty and innovation.
These things worked when we were small primates fighting over limited food sources on the savannah. Our brain stems don’t know what millennium they are in and still run those programs.
I'm not seeing how you get from share buybacks to a shift in priorities in corporate research. If there's a fundamental reason why it can't be done now how it was before the 80's it's not that.
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