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The Fundamental Problem

2012 June 10
by Greg Satell

We Americans are practical people.  As I said in an earlier post, we like to do rather than think, prototype rather than plan, and let the profit motive guide our society.  We go with what works and when it stops working we try something else.

Overall, the results have been good, some would say spectacular.  We have remade the modern world in our image, compete in every major industry and dominate high-tech.  No one can match our innovation track record, but what does the future have in store for us?

Throughout the 20th century, we were driven by a spirit of discovery.  We not only put a man on the moon, but led basic research in everything from physics to biotechnology.  Our journalistic standards were the envy of the world.  It was our farsighted investment in the fundamentals that drove our achievements.  Have we lost that spirit of discovery?

Bell Labs and the Making of the Modern World

Much of what we consider modern technology originated at Bell Labs. Transistors, lasers, cellular telephones, solar power and even the basic theory by which we store, compress and transmit information were developed there.

As John Gertner explains in his new book, The Idea Factory, Bell Labs didn’t achieve this by simply trying to develop new products, but by making a serious commitment to basic research.  They hired mathematicians, physicists and other scientists whose job it was to break new ground in the science of communication, even if practical applications weren’t immediately clear.

For instance, when Claude Shannon published his groundbreaking work A Mathematical Theory of Communication in 1948, nobody knew what it would be used for, they just knew it was brilliant.  It was decades before it became apparent that his theory of information would become central to digital technology.

It was that kind of long-term thinking that led to major breakthroughs.  Of course, being a monopoly, AT&T was able to make that kind of commitment.  Today’s technology companies are understandably more focused on the bottom line.

All the Kings Men

We now know the Watergate scandal as an event that transformed American society.  It took down a President and changed the way citizens interact with government.  We no longer take official announcements at face value, but we question them, demand facts to corroborate them and maintain a healthy skepticism.  Mostly, that’s a good thing.

However, back in 1972, the scandal was just a low-level break in.  It took Bob Woodward and Carl Bernstein months of investigation to unravel the plot which led all the way up to the presidency.  That represented a significant investment in a story that, much like the basic research at Bell Labs, could have gone nowhere.

At the time, newspapers had their own type of monopoly and the profits to go with it. Nowadays, the story is much different.  News is a highly competitive business and it’s tough enough to retain enough reporters just to cover current events, much less go off for months to follow a hunch.

Not surprisingly, serious investigative journalism is a rare animal these days.  Journalists rely on leaks from sources (often people trying to further an agenda) rather than burning shoe leather chasing down obscure threads.  There are no longer the resources to support that kind of thing.

Monopoly Financing

Many say that we shouldn’t worry.  The profit motive will drive companies to invest in research that benefits their business.  Those that do will prosper, those that don’t will be replaced by wiser corporate stewardship.  However, there is little evidence that is true.

Firstly, as I mentioned above, Bell Labs was financed by a regulated monopoly, AT&T. The research was paid for by excess profits that would have been seized by government if they weren’t invested in some way.  In a very real sense, Bell Labs was a government relations program as much as anything else.

In a similar vein, as Clay Shirky rightly argues, investigative journalism was financed by a monopoly in classified advertising.  Law firms hiring secretaries and kids selling bikes had nowhere else to go.  Newspapers could afford to be publicly minded.

Both those monopolies have unravelled.  When Bell Labs was spun off as Lucent in 1996, it soon faltered and was acquired by Alcatel ten years later.  As the essays in Will the Last Reporter Please Turn out the Lights describe in gory detail, newspapers are now an endangered species.

The Profit Paradox

What will replace the monopoly driven financing of AT&T and newspapers?  In The Business Model Innovation Factory, Innovation guru Saul Kaplan points out that business models rarely last a CEO’s tenure, much less the decades required for fundamental research to bear fruit.

Companies who seek to make money rarely think long-term.  The incentives of corporate executives lean towards quarterly profits, not long-term gains.  If they miss their quarterly earnings target, their stock gets hammered.  Then, even if they keep their jobs, they become takeover targets.  That’s the profit paradox.

Government seems similarly challenged.  It’s relatively easy for politicians to score points by pointing to basic research as “pie in the sky,” wasteful spending, harder to argue for investment in public goods.  Plans for a supercollider were scrapped and one was built in Europe instead.  NASA’s budget has been cut to half the levels of the early 1990’s, just to name a few examples.

Win Some, Lose Some?

Granted, the news isn’t all bad.  Cheaper air travel, social networks and search engines have become valuable tools that increase collaboration and make basic research and investigation less labor intensive.  Moreover, these basic technologies have led to entirely new techniques that we couldn’t have dreamed of a generation ago.

For instance, this article in Techcrunch details a revolution in scientific publication that will reduce time lags and increase the effectiveness of how new discoveries are communicated to the broader world.   Other technologies, like Amazon’s Mechanical Turk make research itself more cost efficient.

In journalism too, technology is driving innovation.  Data journalism is an exciting new technique that can uncover patterns that would have gone unnoticed before.  The Guardian has effectively used crowdsourcing to parse large collections of documents and Wikileaks has unearthed important classified information.

Other sources of funding have sprung up to replace the monopoly financing of years past. Corporate labs like IBM’s still do basic research.  Microsoft recently hired 14 researchers to start their own innovation lab (although they got them from the one Yahoo closed). ProPublica and other nonprofits support journalism.

Still, it’s hard to argue that we haven’t lost something and something important.

A Question of Greatness

While remembrances of times past always tends to be nostalgic, I do believe that it used to be different. In his speech announcing the lunar mission, President John F. Kennedy said:

We choose to go to the moon. We choose to go to the moon in this decade and do the other things, not because they are easy, but because they are hard, because that goal will serve to organize and measure the best of our energies and skills, because that challenge is one that we are willing to accept, one we are unwilling to postpone, and one which we intend to win, and the others, too.

With our infrastructure crumbling, our schools in peril and our commitment to basic, fundamental discover waning, it behooves us to ask, “have we lost that spirit?”  We seem more interested in watching idiotic pundits raving on TV than we do serious public discourse.  Have we given up choosing to do what’s hard, to “measure the best of our energies and skills?”

It’s hard to escape the feeling that we aren’t already paying the price.  This post in HBR argues that for all of our self congratulation, we have had few fundamental breakthroughs for over a generation.  Where was the investigative journalism in the run up to the Iraq war (for that matter, why so many security alerts before the 2004 election and so few after?).

And that’s the fundamental problem.  When we lose our spirit of discovery, we abandon our quest for greatness.

– Greg

note:  If you want to get a taste of some of the thinking that made Bell Labs great, check out Deborah  Mills-Scofield’s blog  Deb worked there in the 80’s and 90’s and is one of the smartest people around.

7 Responses leave one →
  1. June 10, 2012

    The whole time that I was reading this essay Greg I was thinking about the researches that I am constantly doing.

    Funded entirely from my retirement savings nowadays without any deadline I just keep plodding on to do the best I can.

    Father used to tell me that people that had great riches could do a lot of good as philanthropists.

    Over the centuries Cambridge University used to hire people to just research. Some brilliant stuff came from that.

    Today what I see is enormous pressure on university researchers to publish fast and furious.

    None have any time to stop and study in detail and to cover the breadth of topics that I so much enjoy doing. I have spent around four decades observing how the economy works and discussing alternatives with anyone who will listen. What I know is far ahead of what the majority of economists know at present because they simply do not have the time to stop and think in this kind of depth.

    I would publish my book today,but every time I read it I seem to have a new insight or I spot a way in which the reader’s mind will think something that has not been overlooked has been overlooked. So I edit it yet again or add a new section.

    Nevertheless I do think I will publish very soon.

    A synopsis of the 14th draft of the current edition appears on my website here:

  2. June 10, 2012

    Thanks Edward. Good luck with the book.

    – Greg

  3. June 13, 2012


    Hadn’t pegged you as a dreamer and philosopher but I do like it.

    The imperatives of speed, profit and agility have been spectacular in certain manifestations but they’ve destroyed important aspects of human growth – like deep research. What would happen if NASA or the NRP were privatized?

    Thanks for reinvigorating a latent dreamer.

  4. June 14, 2012

    Thanks Hilton!

    As I said, technology itself is solving part of the problem. Exploration and discovery are becoming more efficient. The core of the problem is all too human. I’m not sure that President Kennedy’s speech would resonate today the way it did then. The Apollo program would have probably been ridiculed by tea partiers and killed in some Congressional committee.

    – Greg

  5. June 14, 2012


    History suggests that Kennedy had another key advantage – the Russian launch of Sputnik which caught the US flat-footed. Suddenly the unassailable mystic of the country was under dire threat by the Soviets. Regardless of the ascension of China and India today, neither is as frightening a spectre in the psyche of the general population. Thankfully!!

    Be well my friend,

  6. Bruce permalink
    June 19, 2012

    Even more likely, if pursued today, an Apollo-type program would be run as a jobs program for the cronies of whomever is in power. Whatever gain to society would come at ridiculous cost. Yes, much of what SpaceX has accomplished is built on work by NASA, but compare the approaches. SpaceX, like NASA in the 1960s, has a definable goal and is moving the football rapidly down the field. The current NASA has outlived its goal and became just another bureaucracy more interested in self-preservation than progress. If it successfully re-invents itself as an incubator for private enterprise, it will deserve to live on.

    It’s hard to continuously innovate for decades. What no longer works, must be allowed to die, so that something better can take its place. For this to work, we must free the no-longer-productive resources for re-allocation. One of the prime reasons we suffer from a paucity of basic innovation today is because so many resources are allocated by government focused on trying to determine winners (support a specific solar panel maker run by supporters of a particular administration) rather than pursuing a well-defined goal (like Apollo). Of course, as we commit more and more of society’s resources to things like transfer payments (and pensions), there are fewer resources available to big audacious goals like Apollo. We’re finding out that you can’t beat arithmetic, and money is a finite resource like any other.

  7. June 19, 2012

    Thanks for sharing your thoughts.

    – Greg

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