Not why it can’t be done so much as why it isn’t done. Share buybacks allow companies to reward executives directly as their compensation is tied to stock price. If we started not doing that, the priorities might shift, but those executives like things the way they are.

Before Tim Cook Apple had never done a buyback - Jobs was always thinking Apple could do better with the money in R&D than paying off shareholders. Wall Street did not approve of this position, but Jobs wasn’t one to listen to anybody, so it did not matter. Most CEOs are not going to take such a strong position when they, the stockholders, and every other executive can be guaranteed a financial reward through a buyback.

What's missing from this explanation is that the corporate tax rate was also much higher, but R&D dramatically cut down profit that would be taxed and was taxed lower. So large corporations like Bell Labs and co would basically say "do we give the government X in taxes, or do we spend X on research?". They chose research, so we got the technology that powers our world.

That, combined with stock buybacks and the general take over of Friedman-economics resulted in a far more focused short term thinking and outsourcing research as much as possible due to uncertain horizon risks.

Corporate R&D dies under the short-term thinking of quarterly profits. The best pure R&D seems to be coming from private companies that are able to sustain losses for long periods of time until a significant breakthrough is achieved (e.g. SpaceX, OpenAI, etc.).

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.

Share buyback is the same as giving dividends - except the share holder doesn’t have to pay taxes until they sell. To the company, they spend the same amount on share buyback vs giving dividends. I don’t see how this argument holds up.

Further more, while some might argue that corporate R&D is better due to being closer to the problem but it is private research and not shared with the world like university research is.

It's not even clear that the premise is true. There's lots of 'research' done in the big tech companies.

The biggest reason why companies don't seek to emulate "Dupont, Bell Labs, IBM, AT&T, Xerox, Kodak, GE", is probably that it reads like a list of textbox examples of "companies that failed to execute on their research findings", so clearly there was something wrong with this approach.

I read "stock buybacks in 1982" as shorthand for "financialization and short-term thinking at the expense of long-term gains", which certainly happened across corporate America and Britain starting with Reagan and Thatcher.

Ah yes. The share buyback boogie man. If only companies couldn’t buy back shares then all that extra money would flow into research, except not. Shareholders would be demanding dividends.

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.

share buybacks are sort of a voting mechanism - it shows the company has no other uses for the money than to reward shareholders - hence pumping stock price up.

if the company has a vision - then reinvesting that money into research or what else is better. it might reap the benefits, it might not.

companies use buybacks if they can't do anything productive with the money - Apple is a recent example.

> I'm not seeing how you get from share buybacks to a shift in priorities in corporate research

seems to me investing in your own company:

before: use funds actively for research and development

after: use funds passively to "invest" in your company by buying stock

seems like that old parable where someone buries their investment.

EDIT: parable of the talents

https://en.wikipedia.org/wiki/Parable_of_the_Talents

Yeah, it's nonsense.

I think the core problem is that innovators typically only capture low single digit percent of the value they generate for society.

Bell Labs existed in an anomalous environment where their monopoly allowed them to capture more of the value of R&D, so they invested more into it.

This is the typical argument for public subsidy of R&D across both public and private settings because this low capture rate means that it is underprovisioned for society's benefit.

At least for AT&T, Kodak, and IBM, what was funding their research divisions was monopoly profits. When those dried up, the research dried up as well. The modern equivalent to AT&T is Google.

A few points that seem to be going unstated here:

a) allowing share buy-backs might be good or bad. But it isn't good or bad unconditionally! The restrictions on the buyback policy should matter. Ideally, buybacks should make prices boring not create ultra thin books with hefty valuations that are cheaper to manipulate. But it seems the regulations around buybacks are in line with incentivizing growth and not stabilizing real prices.

b) to some extent putting uncertain/opaque research inside corporations is a defense against getting into regimes where it becomes easier to manipulate prices. I hadn't thought of it before, but if if important public companies become beholden to traded price and it becomes easy enough for large foreign entities to move markets, then it is simply a matter of "pricing" short term market punishment of a company for any policy you don't like. Yes, this might seem a bit far fetched, but remember that this kind of incremental worsening of outcomes is precisely what people say is hapenning via regulation and legal challenge in key industries.

Just some interesting thought legs spun off from the discussions here.

Of course the relation is minimal if it exists at all.

Stock buybacks are simply a more tax efficient dividend.

This is disingenuous.

The driver behind the buybacks was also the motive to shift from research and manufacturing and into profits.

The massive failure is in inaccurately quantifying the true value of these labs.

Ma Bell actually was regulated and mandated to put profits into research. It wasn’t a choice though they could go above the minimums I presume.

> I'm not seeing how you get from share buybacks to a shift in priorities in corporate research.

pretty easily: stock buybacks allow you to directly reward executives and funnel profits back to shareholders (by increasing share prices), making the company appear more valuable (further driving investment)

research brings long-term benefits, and immediate outcomes don't show up in 10-Qs

It is a totally delusional argument. Companies always could reward their shareholders, stock buybacks aren't fundamentally different from paying dividends to shareholders. The idea that stock buybacks are what caused a decrease in company funded basic science is ridiculous.

Only in very rare cases is doing basic science anything but a total waste of money, viewed from a commercial perspective. Companies should seek to be commercial entities, which operate for profit. Anything else is just self destruction.

Look at Bell Labs, it could only exist because some company decided it could use a money shredder. Bell Labs could not survive the dismantling of the Bell telephone monopoly, because ending that monopoly ended the prerequisite that was needed to allow it to exist.

Why not?

Suddenly they had a more lucrative was to spend their money, so they did.

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?

You're not missing anything, it's just completely wrong.

"Seriously spent" where serious is less than the cost of a single bomber for the military. I forget what Geoffrey Hinton said it was, but it was an embarrassingly small pittance.

Military spending is largely economic dead weight, roughly the equivalent of handouts. And the end result is deterrence in a game of prisoners dilemma. Yet it is sacrosanct, and subject to ever increasing budgets for no gain.

Because talent and ideas move so easily between the US and Canada, any useful basic science that Canada comes up with will ultimately be monetized in the country with 10x the population, 15x the GDP, and 100x the stock market and VC funding depth.

This could start to change if present US hostility towards all things foreign results in a shift in investment and migration.

I’m blind, and participate in a lot of research projects to create accessible technology, which are mostly done by universities. What I have noticed as a foreigner participating with US based universities is that, a lot of this research while very high-quality and very well done does not actually result in anything that the intended audience gets to use or experience. And a lot of this is due to the amount of red tape, as well as a lack of risk taking. This means that without trying to go commercial a lot of these projects end up shelved and many potential users simply never see the benefits.

Not only did SpaceX make breakthroughs considered impossible by the "experts" in the industry, they did it by hiring a guy who literally built rocket engines in his garage to design the engines. The key here is personality. And the type of person who actually wants to build things and get things done absolutely recoils at bureaucracy and the type of people who like it.

When you build something to the point where there is a bureaucratic "establishment" in control you can be sure that innovation slows to a crawl. You may still have a few individual scientists doing great work, but you can be sure that some miserable bureaucrat will pat him on the back and stick it in a drawer somewhere never to see the light of day again. The same is true whether that bureaucratic establishment is at a government or in universities, or any other type of bureaucratic organization.

Research is necessary but not sufficient. Also need access to capital (and eventually capital markets) and a sufficiently sophisticated legal framework/safety framework so you can enforce contracts at least most the time. Good research is just a vehicle for producing knowledge and talent.

> The US science establishment was all about buying and utilizing Russian rocket engines until he-that-shall-not-be-named came along. SpaceX took the breakthroughs that existed in the US in things like control theory, which the same science establishment had failed to value appropriately.

I feel like you're confusing "science" and "engineering". SpaceX is fundamentally an engineering company, not a scientific one. Don't get me wrong, they've done impressive work in engineering innovation, but that's fundamentally different from scientific research. And as the article points out, engineering innovation from the likes of SpaceX is usually reliant on that foundational scientific innovation, which in turn is essentially useless without an engineering partner to realize scientific discoveries.

> It doesn't look like the science establishments of any country are actually successfully feeding their innovation machines, or have done so for decades.

Really? Is it just a coincidence that up until recently the US had some of the most robust scientific funding and was an unbeatable source of engineering innovation? For that matter, are there any real counterexamples where science research is non-existent but engineering excellence abounds?

How's China doing? They seem to have a lot of research going on that feeds into their manufacturing fairly quickly from the papers I hear about

"real academic diversity" is doing all your lifting here

Canada is also reaping outsized rewards for that investment. There are plenty of AI jobs in Canada that never would have existed.

The problem is that in Canada we're willing to invest a little for a long time. But we're not willing to make big bets.

You can raise far more capital in the US than in Canada. So naturally large rewards come to those who are willing to make large bets.

The gravy train will crash. Fortunately, given many of those who facilitated it will die within 20 years, and then that will be someone else's problem.

> tuition paid by students in the social sciences is effectively subsidizing the STEM fields

This is not true at my state flagship R1 institution. Tuition and fees make up a little over 10% of the institution's total revenue. General funding provided in our state budget provides a larger percentage of the total revenue to the university and federal research funding provides an even larger percentage than the state.

The essential takeaway here is that our state taxes subsidize the actual cost of providing education to in-state students. In-state students are mandated to be at least 80%-ish of students.

The professors in the STEM fields are required to raise a significant percentage of their salary via research grants ("soft" money), teaching, and service work. The non-STEM professors are more often funded via "hard" money - eg, the institution has committed to pay the salary of history professors.

I googled and apparently a little more than 70% of undergraduate students in the US attend public schools. I don't know much about how funding works at the private universities that have the other 30% of undergraduate students.

Raising (already record high) tuitions that have far, far outpaced wages and inflation should be a last resort. You can start by cutting bloated admin, reduce fraudulent procurement/graft (e.g. the $700k Berkeley Chancellor's fence: https://www.cbsnews.com/sanfrancisco/news/700k-iron-fence-co...), vanity construction, study abroad admin budgets that dwarf actual student grants, and the executive compensation/perks by admin.

And this is just mentioning a sample of admin bloat, never mind the other areas.

> I read or heard someplace that at many universities tuition paid by students in the social sciences is effectively subsidizing the STEM fields

I'm very skeptical of this claim.

In fact up until a recent funding method change from the Trump Administration, most grant money was subject to "overhead"--a nebulous nonsensical accounting trick that allowed the university administration to get upwards of 60% of the dollars that are earmarked for grants. If you invent something, the school will take 70% of the revenue from the innovation. Much like VC, some big wins can power the school for years.

Actually, most highly productive research universities use the research as a prestige magnet and marketing tool to help grow endowments and keep up in the US News college rankings.

I would be great if the funding weren't so opaque. We may be able to find accounting info for the public univeristies. I would bet money that, Liberal arts tuition likely goes into administration, endowments, and campus improvements for student life (better food in the dining halls...)

> I read or heard someplace that at many universities tuition paid by students in the social sciences is effectively subsidizing the STEM fields

Diploma mill universities in my state are consolidating the smaller STEM universities and trade schools to build football and sports programs, gyms, and "lifestyle" amenities.

This university in particular [1] mints basket weaving degrees and has used consolidation to build sports programs [2] and lavish facilities for sports.

It's also been a revolving door of politician to high-ranking, high-compensation executive staff positions.

This university [3] has used funding to acquire properties from the state, such as the 1996 Olympic Stadium [4].

Neither of these universities does real, impactful research. The latter is ranked as an R1, but everyone at the "real" R1s in our state will tell you this is a fabrication. They're diploma mills and extract six figures from their student body. They turn this money into sports facilities and upper level faculty pay.

[1] https://en.wikipedia.org/wiki/Kennesaw_State_University

[2] https://en.wikipedia.org/wiki/Kennesaw_State_Owls_football

[3] https://en.wikipedia.org/wiki/Georgia_State_University

[4] https://en.wikipedia.org/wiki/Centennial_Olympic_Stadium

I like to imagine that thermodynamics happened because industrial metallurgy and boiler design advanced to the point where people started asking "what are the fundamental constraints?"

There's a chance that it didn't actually happen that way, though.

edit: I also heard that Louis Pasteur did work for breweries, answering the question "Why do some batches come out nasty while most are fine, given the same inputs?"

The utter lack of self-awareness needed to post something like this now should humiliate them, of course it's a throwaway account.

That's short term thinking.

You can't stop innovation across the planet, you will lose control over time as adversaries continue to innovate and subsume antiquated control structures.

The people who should read this article and won't are actually an anti-growth movement. The silicon valley bros I work with are lapping up the sabotage because they want a lower standard of living in America and less science and innovation because they are already comfortable enough. Their sites are set only on the short-term gains of anti-Muslim and anti-abortion sentiment and "though talk" on immigration. Results are not that important. They claim that there would be enough funding if universities funded it with their endowments.

The anti-government sentiment is frankly anti-American. Even the ones who are naturalized don't know the basics about how ballots are validated ("If my wife vote with a provisional ballot, couldn't just anybody?"). I thought there was some testing for naturalization but it must be easy to cheat.

Anyone who convinced themselves that "economic anxiety" was actually a thing should talk to any MAGA or "centrists" about the present state of the economy.

It depends upon the field you are talking about for diminished return and less innovations. Returns have been thoroughly diminished when it comes to raw power in weaponry for instance. With anti-ship missiles already it is rather 'you get hit and you die'. Railguns haven't really been working out well for instance, and even if they did succeed all they would do is create 'stable magazines' while adding 'unstable' additional power production. Precision is the area where real work is being done, lumping in drones as an example of precision compared to say missiles or bombs which just explode at a destination, or mines which just explode when anything triggers it.

There are some major advancements in biotech for instance that are nothing to sneeze at, and even more in the pipeline (which admittedly may not pan out). Organs may not qualify as an invention technically, but being able to manufacture them certainly does. Not to mention how environmental tech is needed now more than ever.

Science being less convertible to inventions could have counterintuitive effects if it were true. Like smaller nations being in a 'don't even bother' situation while superpowers gain a literal monopoly on invention due to the rareness raising the barrier to entry to get anything meaningful out of it.

Politicians defunding and discouraging science is based more around memes and suppressing dissent than anything concrete. The reason not to create such 'stability' is generally that when the rest of the world passes by it will not be kind to you. But even if science somehow became literally useless tomorrow (an impossibility, of course), I highly doubt that politicians would not be such rigorous cost-oriented stewards that they would consider it worth the political capital to uproot the entrenched bureaucracies which no longer serve a purpose. Even if they knew it for certain was useless they might consider the spending a worthy price to pay for false hope. Crowds get real ugly when you tell them that things will never get better.

Maybe but the successful part of the US got there through science and tech. So I think more science and tech is a better prospect long term.

That's a strawman, you're not quoting anyone and the article doesn't imply anything so reductive.

That would depend on how the funding is controlled. If funding approvals had to go through partisan bureaucrats in the White House for approval, yes, that's a planned economy. Historically it's been disparate groups of scientists who decide how block grants from Congress get divided. I've had colleagues who go and work at the NSF just for that role. I wouldn't say that guy making decisions about what kind of programming languages research gets funding is planning the economy.

I also wouldn't say Congress allocating this or that block grants toward broad areas is planning the economy either. Usually planned economies are bad because it's one guy or one committee doing the planning, and they're really just a dysfunctional and doesn't incorporate evidence to make decisions. You get better decisions when you spread the planning across groups of loosely affiliated experts in their field.

"Venture funding is the engine of economic innovation" is a tacit admission we have a planned economy.

>The argument that the shift from corporate research labs (Bell Labs, Xerox PARC, etc.) to stock buybacks killed basic science investment is compelling.

It is not compelling at all. The difference between dividends and share buybacks are not big enough to explain this at all. The argument is totally absurd, companies could always reward their shareholders with their profits.

Bell Labs did not end because of share buybacks, it ended because Bell was broken up and their free money printer did no longer exist.

>If the US is increasingly relying on universities for foundational research, and corporate R&D is only focused on short-term, applied projects, we're definitely running the innovation engine on fumes.

Why? This is just total nonsense. The only difference is the physical location of basic researchers. And that the government decides what to fund. That is literally it.

Basic university research is still funded by corporations. Only they are paying the money to the government, which then decides what to fund.

Tenured academia, sure, burn it to the ground, no survivors, mostly a temple of mean girls and enablers of those mean girls. Adjunct and other non-tenure track professors, however, not so much. They do the real work along with the postdocs and grad students. And they get the least recognition. And oh the bellyaching when they leave academia with no hope of a tenured position and 10x their salary by pivoting to industry.

I understand why academia might be a racket. But why do you think they are actively hostile to technological progress? Are we including all the premier institutions in that claim?

if scientists are so curious, why do they have to eat??? checkmate atheists

Less snarky: getting funding and making a living in academia, which is the most accessible way to be a scientist, has been cutthroat since long before this administration. If it were more accessible, or if staying alive weren't so damn expensive, I think we'd see more curiosity-driven science being performed.

Also, I don't believe one negates the other. As an engineer, my work satisfies my curiosity / desire to build, and I would do it for $50k, but I'm not gonna take a pay cut to prove how curious I am.

Lets say the scientist takes $0 home (which is ridiculous btw). even then you would need the almighty "funding" to setup a lab, recruit participants, etc.

Anybody doing science at a University is definitely doing it at a significant discount to their salary (phds are paid ~$50K at the high end) at a private company.

Here we have someone who clearly practices little real science, as evident by the ease with which they speak absolute statements that apply extremely broadly.

I believe that most scientists start out being driven by curiosity. Just like most politicians start out being driven by ideology.

Unfortunately, we've created a system that wears them down to being driven largely by self-preservation.

Many people eager to better the world come of age every second. It's just that once they've amassed enough power to make a dent, most of them have been worn down.

Everything in the world is driven by money. There was never such a thing as curiosity driven science.

What pays for your leisure time so you can be alive and not starve? Money. Nobody on the face of the earth can just be curious and do science and not starve.

Income inequality in the US hasn't increased since 2014. Wage inequality severely decreased between 2019 and 2023.

https://www.nber.org/papers/w31010

Sometimes good things happen!

> Then fund science. Just because the government has done it previously doesn't mean it always has to be like that forever.

I do. I'm not one of these wealthy startup founders, just a guy earning a salary--but I've donated to foundations doing basic research many times; and even to individual researchers when they lost a grant but were doing work that I wanted to see the results of.

However, funding science in general this way is likely to miss a lot of value. Not everyone makes basic research a priority in their charitable giving. More importantly, not everyone has my impeccable research taste: not to sound elitist, but if the average American's priorities determined the directions for basic research, we'd have thousands of studies on why vaccines cause autism, an nothing on weird stuff like the medical potential of gila monster saliva.