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Bell Labs Kills Fundamental Physics Research
An anonymous reader writes with this snippet from Wired: "After six Nobel Prizes, the invention of the transistor, laser and countless contributions to computer science and technology, it is the end of the road for Bell Labs' fundamental physics research lab. Alcatel-Lucent, the parent company of Bell Labs, is pulling out of basic science, material physics and semiconductor research and will instead be focusing on more immediately marketable areas such as networking, high-speed electronics, wireless, nanotechnology and software." Jamie points out this list of Bell Labs' accomplishments at Wikipedia, including little things like the UNIX operating system.
That's sad.
I've seen so many of the big labs die. I happened to be at IBM Alamaden the day IBM exited the disk drive business, a sad day and the beginning of the end for Alamaden. I saw Xerox PARC in its heyday; I've used and programmed an original Alto. DEC's labs are long gone, killed in the Compaq/HP takeover. HP Labs is a shadow of its former self.
Who in American industry is still doing basic research?
You can't convince me that the transistor didn't make them a lot more money than they put in when you look at the big picture. I'm willing to belive that on paper, Bell labs may have been a loss, but of course that's not the same as the division being dead weight. I'd be suprised if this decision wasn't based entirely off of myopic buisness decisions. Want to raise your stock? Maybe if you fire everyone and cut costs to zero, your investors will be pleased.
I of course don't know the inside story, but sounds stupid enough. If this is the case, here's hoping Alcatel-Lucent loses a lot of money quickly and opens it back up.
That, and, IIRC a federal law that obliged it to finance research with 50% of its profits in exchange for the monopoly.
As I recall it wasn't a requirement that they do research. It was permission to include the cost of research related to telephony in their cost of doing business - on which they got to set monopoly phone rates so they got a specified rate of return (6% if I recall correctly).
The result was that the more money they spent on research, the more profit they made.
So they set up Bell Labs to spend as much money as possible, on anything even vaguely related to telephony.
And it "was an abysmal failure". From year one they made more money on the results of the work (by things like licensing patents) than it cost to run the labs. So basic research was profitable all by itself. B-)
But this counterintuitive effect also has a counterintuitive downside. The rewards for a research project start once it's done and keep coming in for quite a while after it's finished. Most of us would consider this good. But the Harvard Business School approach to management comes into play: The incentive structure on managers is to show as big a profit as possible for a few years and move on, thus looking better than your predecessors and successors and getting progressively better paying positions. So by killing the CURRENT research and just collecting on the results of the previous work they can cut their costs to near nothing while the benefits keep rolling in. For a while. Then they move on. Without new work the revenue gradually dries up and their successors take the rap. (And their successors would have to increase costs while the income was ramping down, which would look even worse, to turn things around.)
Regardless:
Without the guaranteed profit they're in the same boat as every other large cashflow company in the world. Perhaps basic research would continue to be profitable beyond the dreams of avarice. But there are other profitable things to do with the money where the return is more visible in advance, rather than crapshooting on what basic research might come up with. So (like all those other companies), the new generation of management reacts to the new situation by doing the standard thing - which doesn't include basic research.
(And it doesn't help that they already went through the "cut expenses and look good on the return on old work" phase a few years back. IMHO this is the house of cards coming down.)
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As I understand it, Xerox PARC had something similar going on but for a different reason: a strange accounting system.
One of the first things PARC did was to design a "new control panel" (and brain) for Xerox copiers. This replaced a bunch of relay logic with a microcomputer/early logic chips. And that saved a LOT of money.
PARC got credited with that savings on all the copier products sold from then on (and with similar stuff it did later). So it could spend money hand-over-fist on whatever it wanted and still look profitable.
(This was the same accounting department that, if I've got THIS right, screwed up big time when Xerox went into the mainframe business as the first company to take on IBM's core business, 'way back in the early days of "foreign attachments" opening up the IBM big-iron market. They built a CPU. After a while they decided that they were in the red on it big time, folded the division, and sued IBM on antitrust. In those days equipment was all leased. As a result of the suit IBM got hold of their accounting info and discovered the hadn't really understood how to interpret lease income. They were actually VERY profitable, and had folded the division because of this accounting screwup. Of course this discovery folded the suit.)
Bantam Dominique roosters crow a four-note song. Once you've heard it as "Happy BIRTHday" you can't NOT hear it that way