There’s a subtle distinction between freedom to suggest ideas and freedom to pursue ideas

# §Bell Labs Model

### Questions
- [[Why was Bell Labs Different?]]
- [[Why hasn’t Bell Labs been replicated?]]
- [[Was Bell Labs an anomaly?]]

### Conclusions
- [[Bell Labs and AT&T had timescale alignment]]
- [[Bell Labs is one of the few examples of an innovation org that was aligned with its money factory]]
- [[Bell labs had a budget of 2.8 billion 2020 dollars]]
- [[Bell Labs was only profitable in conjunction with AT+T]]
- [[AT+T benefitted significantly from creating better technology]]
- [[Regulation drove many of Bell Labs’ actions]]
- [[All the work at Bell Labs needed to tie back to the system]]
- [[Bell Labs empowered young people]]
- [[Bell Labs hired people before they had a role or expertise]]
- [[The work at Bell Labs that was most valuable to AT+T and the work that was most valuable to the world was fairly disjoint]]
- [[The famed bell labs research was a fraction of their activity]]
	- [[Bell labs was primarily not researchers]]
- [[Bell labs brought many disciplines together under the same roof and broke down barriers between them]]
- [[Bell Labs did not give researchers complete freedom]]
- [[Bell labs asked people to do useful things but left them room to say huh that’s funny]]
-  [[Bell Labs management was extremely light]]
- [[Bell Labs didn’t have a unique model]]
- [[Bell Labs selected for people with only academic pedigrees and with a sense of adventure]]
- [[Bell Labs was not a business]]::NW::
- [[Bell labs existed before continuous improvement was expected]] ::NW - stub::
- [[Bell Labs was a dance of individuals and institution, prototyping and manufacturing, invention and discovery]]::NW::
- - [[Bell Labs enabled free radicals]]



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Bell Labs

Bell Labs was only profitable in conjunction with AT+T

AI research is an exception to the decline of corporate R+D

Bell Labs did not give researchers complete freedom

Corporate labs no longer fill the niche they did in the early-mid twentieth century

§Bell Labs Model

Labs Document Outline

# AT+T benefitted significantly from creating better technology
AT+T benefitted from new technology in three distinct ways. First, its scale and the nature of its products and services meant that even small technological improvements could have massive effects. Second, there was a semi explicit contract with the government that AT+T would not be broken up as long as they continued to improve their services and shed excellent technology. Third, M+A blocking regulation meant that AT+T couldn’t depend on acquisitions to provide technological advances. 

![](../BearImages/5733ABA1-C990-4519-921D-35ADC34D7D5A-88049-000758A621BC58CC/IMG_0250.jpg)
[[“The System” of AT&T]] was so huge that even small efficiency gains translated to saving tons of money. Unlike in software, creating new markets (like calls to Europe, cables that can survive extreme environments, etc) required creating new, physical technology which in turn sometimes required new scientific discoveries. 

AT&T’s agreement with the government was that as long as AT&T continued to improve its offerings, stay focused on communication, and shed technology, the government wouldn’t be break it up its monopoly. As noted earlier, the way that AT&T could continue to improve its offerings was through technology. 

Finally, the government blocked large company M+A at several points in the 20th century and startups were just less of a thing before the latter half of the 20th century. At the same time, the nature of the technology increasingly seemed to be beyond the capabilities of a single inventor. [[Does the nature of the activities to create new technology and science change over time?]]  Consequently, in order to benefit from technology, AT+T needed to build it itself.

### Related
- [[Healthy corporate R+D requires a trifecta of conditions]]
- [[Bell Labs was only profitable in conjunction with AT+T]]
- [[aroraChangingStructureAmerican2020]]



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gertnerIdeaFactoryBell2012

Bell Labs management was extremely light

Expensive research needs to address an existential threat eventually at an organizational level to maintain support

# All the work at Bell Labs needed to tie back to the system
There’s a common conception that research at Bell Labs was completely unfettered. My hunch is that this was not the case and all the work at Bell Labs did need to tie back to AT&T’s core business in the same way that any corporate lab does, but the nature of [[“The System” of AT&T]] and it’s particular location in time and place enabled many researchers to forget about the box that they were in. 

AT&T’s system was so vast and multifaceted that tons of research *did* tie back to it - chemistry, electronics, information theory and other mathematics, materials. [[Bell labs brought many disciplines together under the same roof and broke down barriers between them]] not because abstractly that’s how you get good ideas but because that is what they needed to do to improve the system.

It also helps that this wide range of relevant work happened to coincide with the most exciting research fields at the time. There’s *heavy* mixing between correlation and causation here (silicon electronics and information theory were basically created at Bell Labs, etc.) However, it is important to note the convergence between hot research topics and things that were actually relevant to AT&T’s core business. Today, this type of convergence is arguably a big reason why [[AI research is an exception to the decline of corporate R+D]]. 

[[Bell Labs management was extremely light]], which presumably helped with the perception that the research was unfettered. Of course, management could only be so light at least in part because the range of relevant research was so large. 

Thanks to the size of the boundaries on useful research and the quality of the management, I suspect that they were also able to hire people who had no desire to leave the box. It’s easy to feel unfettered when given free rein, you would do the things that a manager would want you to do anyway. This is of course the ideal everywhere but the circumstances at Bell Labs made it easier to achieve.[^1]

[[Claude Shannon]]’s experience illustrates what happened when researchers strayed outside of work that wasn’t relevant. [[It’s hard to know exactly where a line is until you cross it]]. These anecdotes look like something that would happen at any corporate R&D lab. While there’s no concrete evidence, I suspect that incidents like this happened not-infrequently, but they happened with less prestigious people so they weren’t remembered or recorded.
![](../BearImages/6A8E8720-577B-4BC1-B60A-71DAF6330D20-88049-000786D8D9EBBAA0/5082BE7F-5871-43BC-B95A-782C111B1E5E.png)
![](../BearImages/741B71CF-F149-4515-BBC7-9BA854B08C89-88049-000786DB1790630D/IMG_0188.jpg)

### Related
- [[Expensive research needs to address an existential threat eventually at an organizational level to maintain support]]
- [[Innovation orgs need to be aligned with their money factory]]
- [[Regulation drove many of Bell Labs’ actions]]
- [[Bell Labs did not give researchers complete freedom]]

[^1]: Sidenote - I suspect this is the case with [[JCR Licklider]]’s program at ARPA. [[Alan Kay]] describes him as giving researchers free rein, but zooming out, this was not universally the case. Instead, it seems like Licklider was clear enough on his vision and what needed to be done that he could find researchers who would happily stay in the box he wanted them to be in.



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Bell Labs is one of the few examples of an innovation org that was aligned with its money factory

# Bell Labs and AT&T had timescale alignment
# Bell Labs and AT-T had timescale alignment
Both Bell Labs and AT&T had a [[Buxton Index]] of a few decades - they both thought about problems on the timescale of decades. 

 On AT&T’s side, their government-approved monopoly and the mandate that allowed them to maintain it both gave them the [[Slack - concept]] to plan on the scale of decades *and* the incentive to do so.  

I’ll make a hand wavy argument for Bell Labs’ Buxton index by using the transistor as an exemplar. It officially took eight years - from 1946 to 1954 to create the silicon transistor. However, work on the transistor began in the 30s before WWII (and was paused during the war) and the first electronic switching centers came on line in 1964.  All together, the transistor timescale was maybe 20 years.[^1]  It seems reasonable to use this 20 year mark as a rough approximation for Bell Labs’ Buxton Index. 

It’s hard to imagine the rough equivalence between AT&T’s Buxton Index and Bell Labs’ was a coincidence.

This alignment changed after AT&T’s breakup. Bell Labs’ Buxton index didn’t change, but thanks to competition AT&T no longer had the luxury of a multi-decade Buxton index. 

![](../BearImages/7922CB30-5949-4360-82B8-20283BFE41AA-88049-000786B4DA543094/IMG_0115.jpg)

### Related
- [[Bell Labs didn’t have a unique model]]
- [[Innovation orgs need to be aligned with their money factory]]
- [[Bell Labs was not a business]]
- [[Rewards in a big company operate on one timescale and R&D happens on another timescale]]
- [[Mismatched Buxton Indexes lead to shear forces]]

[^1]:I have very little evidence, but my hunch is that 20 years is roughly the timescale to go from the hunch that a phenomenon can be exploited to  exploiting it at scale. [[Phenomena-based cycles]]. This timescale is probably compressed for electronics and software because of Moore’s law and development speed (though perhaps not as compressed as many people intuit.) 20 years is *shorter* than the 50 year Buxton index that [[EW Dijkstra]] suggests (is/should be) the norm in Academia. [[The Strengths of the Academic Enterprise]]. 



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Regulation drove many of Bell Labs’ actions

Bell labs asked people to do useful things but left them room to say huh that’s funny

All the work at Bell Labs needed to tie back to the system

# Bell Labs did not give researchers complete freedom
While [[Bell Labs didn’t have a unique model]] gave researchers a ton of leeway, they weren’t given complete freedom. Instead, they were generally given high level directions that would potentially be useful to AT&T - “figure out how to get more information in this copper wire” “figure out how to make switching speeds faster and more automatic” and *then* given freedom. They also just biased towards hiring people whose research interest lay in areas that seemed vaguely useful to AT&T.  Remember, [[AT+T benefitted significantly from creating better technology]].

All the stories of great bell outputs do seem to start with “so I was working on this practical high level directive.” However, unlike most goal-directed research now, it *does* seem like researchers were given the freedom to pursue tangent research based on ‘huh that’s funny moments’ like  [[The ability to say ‘huh that’s funny’ is important for discovering new phenomena]]. 

There’s a strain of thought that says “researchers should be given complete freedom to investigate what they want” independent of any consideration of use. This line of thinking is the main theme of [[brabenScientificFreedomElixir2008]] for example. It’s important to call out that this is not what Bell Labs did because in conjunction with Braben’s arguments the contrast suggests that both approaches can lead to paradigm-shifting discoveries. To use the [[Quadrant Model of Scientific Research]], Bell Labs operated from Pasteur’s Quadrant. The subtlety is that while they *started* with a consideration of use, sometimes it ended up with currently-useless fundamental understanding (like [[Cosmic Microwave Background]].) 

 Like many things, I suspect that hybridizing the two approaches will lead to failure. An organization needs to pick an approach and commit to it. 

### Related
- [[Einstein would have been stuck in a patent office - failures of paradigm-shifting science]]
- [[Venkatesh Narayanamurti Podcast 20 May 2020]]
- [[Andrew Odlyzko Podcast]]
- The freedom to pursue ‘huh that’s funny’ seems important for [[Possible FRO Structures]]

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Bell Labs hired people before they had a role or expertise

The good idea fairy is the failure mode of a single decision maker

# Bell Labs empowered young people
“Empower young people” is another one of those admonitions like “have light management” ([[Bell Labs management was extremely light]]) that sounds uncontroversially good, but is both hard to do in practice and easy to screw up. 

Bell labs’ tendency to empower young people is illustrated by [[Jim Fisk]] being in charge of radar/magnetron work at age 30 in the middle of WWII. 
![](../BearImages/662F1380-98EC-4427-A641-F5F686CE2269-4422-0007B95693CDD5A5/IMG_0144.jpg)

Empowering lightly-or-unproven people can clearly backfire, so doing it depended on a substrate of trust - both upwards, that higher management wouldn’t second-guess the decision and downwards, that the empowered young people could handle it. Where did that underlying [[Trust]] and conviction come from? It’s not clear to me, but getting to the root of it seems important for riffing on Bell Labs.  [[Research requires more trust than other disciplines]].

Keep in mind that empowering young people was probably not a uniquely Bell Labs thing ([[Bell Labs didn’t have a unique model]]) but a broader cultural trend in the first half of the 20th century. However, [[Mervin Kelly]] was even willing to promote young men *at the expense of* veterans, which is doubly risky and vaguely violates other cultural norms like the idea of loyalty being rewarded. 
![](../BearImages/55AED6C9-A8DD-4602-9607-405B596C2992-4422-0007B966D9720770/IMG_0148.jpg)
![](../BearImages/12DF4EE9-39E5-4C58-BBFE-56D91A675344-4422-0007B96859A81B8A/8BCC0E41-9CD4-41D2-9B8D-CD10BAEB8D73.png)

Also note that it was empowering technically-trained young people to do things that were in or adjacent to their areas of training. This stands in contrast to what feels like a more 21st century Silicon Valley take on “empower young people” which is to say “why shouldn’t we bet on a 22 year old with a philosophy degree to start a drug company. Empower Young people!” [[People who have done a thing should be in charge of a thing]]. 

### Related
- [[The more trust an institution has, the less it needs formal process]]
- [[Bell Labs hired people before they had a role or expertise]]
- [[Research requires more trust than other disciplines]]



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Ideally corporate R+D enables work on a general purpose technology before it’s specialized

Ideally corporate R+D enables targeted dicking around

DeepMind combines bottom-up research work with top-down strike teams

One function of a private ARPA is to fill in the gap once filled by corporate R+D

Week of 29 Nov 2020

# Bell Labs enabled free radicals
[[Bell Labs]] narratives consistently touch on the theme of many very smart individuals who could attach themselves to different projects. In chemistry, free radicals are molecules with unpaired valence electrons - a state which makes them extremely reactive. The idea of free radicals captures a *feeling* one gets about Bell Labs that people were not on a project all the time, or at least had the bandwidth to engage with various projects they weren’t assigned to. There is also a sense that people also had a degree of autonomy over which projects they worked on. 

From [[gertnerIdeaFactoryBell2012]] - `”The Solar cell just sort of happened,” he [Cal Fuller] said. It was not “team research” in the traditional sense, but it was made possible “because the Labs policy did not require us to get the permission of our bosses to cooperate—at the Laboratories one could go directly to the person who could help.”`[[Bell Labs management was extremely light]]

Bell labs also used both culture and architecture to enable free radicals. It’s almost a trope now, but Bell Labs may have been the origin of the building design that maximized interactions. Bell Labs had high quality seminars starting in the 30’s that got people from different projects in a room talking about ideas. Culture and architecture combined in the practice of people always leaving their office door open so someone could come by and ask questions. [^1] [[Architecture matters for creativity]]. 

Of course, this isn’t to say that people just worked on whatever they wanted. [[Bell labs asked people to do useful things but left them room to say huh that’s funny]] so the freedom was usually within the scope of an area that would be useful to AT&T. Luckily that was a lot of areas. It’s also unclear how much this applied to the majority of Bell labs that was working on more direct product development instead of research and then how much that (less credited) group was responsible for Bell Labs’ perceived success. [[The famed bell labs research was a fraction of their activity]]. 

Enabling free radicals is line with how [[JCR Licklider]] managed the IPTO but stands in *contrast* to many other [[DARPA and corporate R&D filled overlapping but different niches]] programs. However, DARPA is actually woven *into* the US innovation ecosystem.  The fact that[[DARPA doesn’t do any research in house]] means that it cannot exist separately from [[aroraChangingStructureAmerican2020]].  It also means that any DARPA technologies cannot be attributed solely to DARPA, especially if they succeed. One must also consider the fact that program initiation is a spectrum from complete PM initiation to complete performer initiation. My hunch is that programs on the performer end of the spectrum had a chance to ramp up in a corporate lab.

### Related
- [[Bell Labs selected for people with only academic pedigrees and with a sense of adventure]]
- [[Designed Serendipity]]

[^1]: I suspect that open door policies are subtle and differ from open office plans. An open door says “I am in my own space and welcome you to come in — be considerate” while an open office says “I am at your disposal constantly without thinking.”



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When is push or pull appropriate for innovation orgs?

Bell Labs empowered young people

Comparing and contrasting Bell labs, DARPA, and Venture Research

# Bell Labs hired people before they had a role or expertise
Throughout its history, there are examples of people being hired because they were smart and had experience vaguely in the area of electrons, etc. On the other hand, they seem to consistently hire people with good *PhD* academic pedigrees. [[PhD academic pedigrees are higher signal than most undergrad pedigrees]].
![](../BearImages/738E9E8A-6A50-4FDC-9A8C-E30CB3A8DFA6-4422-0008049E8C06D111/IMG_0136.jpg)
This strong pull recruiting was complemented by, in some situations, enabling people to do a rotation and figure out which group they wanted to work with.  

This style of recruiting is very much in line with the “pull” approach. [[When is push or pull appropriate for innovation orgs?]]. In terms of ideas going in, Bell Labs required almost none, DARPA requires some, and Venture Research requires extremely well thought-out ideas. [[Comparing and contrasting Bell labs, DARPA, and Venture Research]]. It requires a lot more evidence, but this pattern suggests that the longer the ‘gestation’ someone has in an organization before they need to be productive, the more you can get away with getting just “good people.”  This conclusion might seem banal, but it’s important for getting organization design and expectations right, and people often screw it up. If you’re going to hire people before they have a role or expertise, you need to have appropriate internal structures in place. Similarly, if you *don’t* have those structures in place it’s important to have a good external-idea vetting process.

### Related
- [[Bell Labs empowered young people]]



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Innovation orgs need to be aligned with their money factory

Alignment requires existential threats

The incentives inherent to corporate R&D mean that researchers motivated by money leave and those who are motivated by glory are not the best in the world

Why was Bell Labs Different?

# Bell Labs is one of the few examples of an innovation org that was aligned with its money factory
 [[Innovation orgs need to be aligned with their money factory]] and arguably one of the reasons behind [[Bell Labs]]’s outlier success was that it managed to have a broad scope and long time scale that were both *still aligned* with AT&T.

At the end of the day AT&T’s goal was to maintain its monopoly and increase its business. In order to do that, it needed to enable people to make more, better calls. 

[[“The System” of AT&T]]  had such an expansive scope that it actually benefitted from the whole spectrum of activity happening at Bell Labs. Everything from information theory to novel materials directly fed back into AT&Ts core business. More cables are expensive so information theory actually helps people make more calls. The faster you can switch, the more calls you can route so semiconductor switchers *directly* help with the goals. 

Additionally, [[Bell Labs and AT&T had timescale alignment]] thanks at least in part to AT&T’s monopoly. The monopoly enabled Bell Labs to plan on multi-decade timescales because they didn’t have to worry about a competitor coming along tomorrow. 

AT&T maintained their monopoly only with tacit approval from the government. This approval rested heavily on Bell Labs’ output - both continuous improvements to A&+Ts offerings and open licenses from the lab. [[Regulation drove many of Bell Labs’ actions]]. 

Between the cost reductions and monopoly maintenance, Bell Labs was actually addressing existential risks to AT&T. [[Alignment requires existential threats]]. Even R&D labs that are building new product lines within the scope of a company’s actives rarely address existential threats to that extent.

This alignment in both timescale and focus-scope between an innovation org an its money factory. See [[§Startup Constraints]], [[§Corporate R+D Constraints]], [[§Philanthropy and Non-Profit Constraints]], and [[§Academia Constraints]] for all the lovely ways the misalignment can happen.

## Related
- [[gertnerIdeaFactoryBell2012]]



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Research requires more trust than other disciplines

For a certain class of research, deliverables can be detrimental

Bell labs brought many disciplines together under the same roof and broke down barriers between them

Bell Labs enabled free radicals

# Bell Labs management was extremely light
Bell Labs management gave researchers autonomy, both to work on what they thought was best and with whom they wanted. While on paper this is what most management claims to do, in practice that’s rarely the case. So it’s worth digging into what light management at Bell Labs tactically entailed and perhaps how they were able to walk the walk instead of talk the talk. 

![](../BearImages/FBB01D7F-FB72-4B5D-A54A-87F6D9F98C8A-88049-0007B3CAFC68AFC1/IMG_0206.jpg)
Bell Labs had explicit policies that prevented managers from controlling who could collaborate with whom. My hunch is that the policies were more a codification of culture than anything else and someone citing the policy and telling their boss ‘you can’t stop me!’ was rare. However, it’s telling that unrestricted collaboration was part of the culture worth encoding. This managerial getting out of the way was one of the ways that [[Bell Labs enabled free radicals]]. 

![](../BearImages/358508FB-EFA0-44E8-997D-0CE7B250A8CA-88049-0007B3C5E0753C7D/IMG_0158.jpg)
`A believer in granting a degree of autonomy to researchers, he had not asked about, and had not been kept appraised of Bardeen and Brattain’s work. What’s more, there was a tendency at Bell Labs to confine important developments to middle management for a purgatorial period.`  
Bell Labs management did not put pressure on researchers to produce demos and there was an explicit time delay built in as the demos moved up the management chain. This approach — basically the inverse of the [[Media Lab]]’s “demo or die” — is worth calling out because expectations around demos have a strong effect on organizations that isn’t discussed enough. In some ways demos are valuable because they put pressure on people to get their work into a form that’s legible to people outside of their thought bubble. On the other hand they can often lead to creating “movie set products” where they are basically shiny shells that can do the demo and nothing else. Bell Labs’ management seems to have walked that line well. In order for the purgatorial period to work, moreover, the middle managers need to have in turn not felt pressure to surface demos in order to advance their careers. 

[[John Pierce gave four reasons why Bell Labs worked]] and `A technically competent management all the way to the top` is the first item on that list. I suspect that the technical competence helped the management stay light because it enabled trust between the managers and researchers. [[Research requires more trust than other disciplines]]. This trust meant that there was less dependence on metrics and milestones. The trust, and its resulting light management and efficiency is why [[People who have done a thing should be in charge of a thing]]. 

Interestingly, the management style at Bell Labs actually seems similar to [[JCR Licklider]]’s management at ARPA - find awesome people, get on the same page about the precise problems they’ll go after, and then let them rip. [[DARPA does multiple levels of top-down problem generation and bottom-up solution generation]]. 

At the same time, we shouldn’t hero-worship Bell Management.  Pierce may also have just been a bad manager and light management just kept him from doing damage….
`The brunt of his management work [at Bell Labs] had consisted of dropping in, unannounced, on colleagues in their labs to ask how work was progressing.`
![](../BearImages/A9B10EF2-FDC0-4C59-BA09-8A12263E8E2E-88049-0007B5D6B1243317/IMG_0253.jpg)

They still committed classic management false negative (preventing someone from doing something useful.) [[Types of management error]]. [[Gordon Teal]] still had to do the classic “work overnight on the side project” move to show that he actually could create high-purity chunks of germanium. ![](../BearImages/D5380E7F-E486-4A6B-991D-ECC088E27D58-88049-0007B4AFC620D39D/IMG_0169.jpg)

And of course, one has to hold the simultaneous views that while Bell Labs’ management was light, [[Bell Labs did not give researchers complete freedom]].  [[All the work at Bell Labs needed to tie back to the system]]. My current mental model for integrating these seemingly contradictory is similar to a coconut - high-resistance exterior and low resistance interior. [[Bell labs asked people to do useful things but left them room to say huh that’s funny]]. 

### Related
- [[Venkatesh Narayanamurti Podcast 20 May 2020]]
- [[odlyzkoDeclineUnfetteredResearch1995]]
- [[Andrew Odlyzko Podcast]]



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What are the different roles in an innovation org?

Bell labs had a budget of 2.8 billion 2020 dollars

Bell Labs and AT&T had timescale alignment

Why try to emulate DARPA and not Bell Labs

Week of 22 Nov 2020

# Bell Labs was not a business
Bell Labs didn’t actually make most of its money directly off of its technology. Its primary source of revenue was just a % of the money from the local operating companies and AT&T itself. It gave technology to Western Electric to manufacture and they in turn gave it to AT&T and the operating companies who then were paid and gave the money back to Bell Labs. The trick is that at no point in this cycle is anybody putting a value on the technology directly. Because of its monopoly status, AT&T would be getting paid regardless of how good its service was. However, the only reason AT&T could maintain that monopoly was because they had a <semi-implicit> agreement with the government that they would continue to improve their services. [[Alignment requires existential threats]]. 

When each piece of the puzzle was separated and needed to interact via contracts and prices, Bell Labs clearly couldn’t stand on its own as a business. The exact explanation of this is tricky and requires some detailed analysis on data that may not even exist.  

![](../BearImages/E3753743-2D42-4C5F-902F-81CE9479EEBB-88049-0006A6BE36DA27BB/IMG_0250.jpg)
According to Peter Drucker’s analysis of the AT&T breakup, it is possible that Bell Labs *could have* become a business, but that would have required radically reconfiguring from what it had been. 

Bell Labs didn’t actually produce products. Once technology was at a point where it was ready to be manufactured at scale, it was handed off to Western Electric. If both organizations weren’t wholly owned subsidiaries of AT&T,  Western Electric would both want a cut (reducing Bell Labs’ hypothetical profit margins) and would either need to be paid up-front or convinced to manufacture new things that they would then sell to AT&T.

It wasn’t that Bell Labs wasn’t creating value - it’s just that it was doing it in the context of [[“The System” of AT&T]].   
![](../BearImages/6DE120B4-C48E-48D4-9713-D49775DDC3BA-88049-0006CEF5E8D607A5/IMG_0231.jpg)

Perhaps one way to look at it is through the lens of [[Transaction costs]]. Bell Labs could only exist because it was getting continuous payments for extremely lumpy outputs (presumably some years, the direct value it delivered for AT&T was massive and some years it was near zero. Because of how human brains work, few companies would be willing to sign a contract that traded a consistent cash flow now for an uncertain innovation in the future. There are also some things that cannot be written into contracts - the trifecta relationship between Bell Labs, AT&T, and government regulators was incredibly valuable to AT&T but couldn’t be made explicit and wouldn’t have been possible if Bell Labs were a separate entity. 

It’s important to note that Bell Labs was not a business both to build a mental model of the organization and to stare a major problem with trying to build the next Bell Labs straight in the face. [[Healthy corporate R+D requires a trifecta of conditions]] and it’s unlikely that those conditions will arise outside of software any time soon. People have implicitly realized this and most ideas to ‘build the next Bell Labs’ involve creating an independent organization. However, building an external organization will require money and  [[People don’t invest in technology, they invest in businesses]]. The upshot is that any spiritual successor to Bell Labs will need to have a radically different structure than the original. 

This note is perhaps a dual to [[Bell Labs was only profitable in conjunction with AT+T]]. 

### Related 
-
- [[The Nature of the Firm]]
- [[gertnerIdeaFactoryBell2012]]
- [[Research should be treated like infrastructure]]



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You need a certain scale for technology development to be worthwhile

Bell Labs was not a business

The work at Bell Labs that was most valuable to AT+T and the work that was most valuable to the world was fairly disjoint

AT+T benefitted significantly from creating better technology

PARPAs ideal legal structure comprises both a nonprofit and a for profit

# Bell Labs was only profitable in conjunction with AT+T
[[Bell Labs]] *did* pay for itself by making [[“The System” of AT&T]] more efficient. [[Xerox PARC]] did as well via the Laser Printer. However, most corporate research labs have more tenuous arguments for their profitability. Note that in both cases, the profitable outputs were *not* the most impactful outputs.  [[There is a significant class of innovations that would create drastically less value for the world if their value had been captured by their creators]]. This disjoint between profitable outputs and outputs later hailed as valuable and important happens so often that I can’t believe it’s a coincidence. [[Seen vs Unseen]]. 

![](../BearImages/4E0869F4-2A3C-4466-AC27-925F7D05EC80-88049-000710A05F0F715D/11D837FA-70D5-43C8-B01D-F49EB1CB8A87.png)

It’s worth paying attention to the mechanism by which both Bell Labs and PARC (and extrapolating wildly, other corporate labs) pay for themselves. In both cases profit was through leveraging the scale and existing competence of the parent company. In Bell Labs’ case, it was by simply reducing cost at scale and in PARCs case it was something that could be produced at sold at scale with the same factories and sales channels.  

The above quote is also notable because it illustrates how the efficiency gains were *actually* existential threats to AT+T because of the roundabout logic of “monopoly maintenance requires continuous improvement and expansion which would be impossible without finding a lead replacement.” [[Alignment requires existential threats]]

There’s a strong and a weak proposition here. The strong proposition is that without AT+T’s scale, Bell Labs would not be profitable. The weak proposition is that even given AT+T’s scale, the transaction costs would be too high for Bell Labs to have been profitable if it were a fully independent organization. 

The strong proposition is pretty straightforward - any invention that isn’t wildly expensive like early computers and rocket ships requires scale to create value. To get scale, non-software inventions require either large manufacturing and sales apparatus and/or a large system to deploy on (in the case of efficiency-type inventions[^1].) So, the profitable inventions from Bell Labs leaned on AT+T’s existing scale.  

The weak proposition is more debatable but important to consider. In a world with zero [[Transaction costs]], it wouldn’t matter whether Bell Labs was joined at the hip to AT+T - if there was an invention that would save AT+T billions of dollars, it would pay a large fraction of that gladly and Bell Labs would be able to support itself as a fully separate institution. However, transaction costs are real (see: [[The Nature of the Firm]].) An independent Bell Labs need to convince a string of non-technical executives at AT+T that they would eventually run out of lead, the size of the problem, and the fact that the synthetic material would work as well as tried-and-true lead. On top of that, Bell Labs would need to realize that they *should* develop a lead replacement or what specific affordances need to be which is the sort of insight that is non-obvious if you aren’t constantly talking to the people who manufacture the cables. [[Prototyping needs manufacturing in the room]].  On top of that, you would then need to convince someone to fund development for the lead-sheath replacement (either internally to your org, for whom cable sheathing is not an existential concern, or externally) which gets you into a chicken-and-egg situation with all the previous considerations. 

There’s a fuzzy thought here about value capture depending on where you draw a box around the system. 

### Related
- [[Bell Labs was not a business]]
- [[Bell Labs is one of the few examples of an innovation org that was aligned with its money factory]]
- [[Profit-maximizing organizational structures can hamstring technologies whose impact depends on them]]
- [[It is hard to capture value from research]]
- [[A technology’s value is relative to the amount of value it unlocks]]
- [[AT+T benefitted significantly from creating better technology]]

[^1]:[[Efficiency type heuretics]] are especially dependent on large systems because of [[Transaction costs]]. If an efficiency improvement makes something $1 more efficient per node, even if there are a billion nodes in the world, if each one is in a separate system and you need to sell to each one individually the transaction costs make it not worthwhile to create and sell it. However, if those billion nodes are concentrated in a few systems, its well worth it.



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# Bell labs asked people to do useful things but left them room to say huh that’s funny
[[Bell Labs did not give researchers complete freedom]], however they also didn’t stop people from exploring if they discovered something that made them say “huh that’s funny.” [[The ability to say ‘huh that’s funny’ is important for discovering new phenomena]].  I suspect this mix of direction-setting led to results that wouldn’t happen either through pure bottom-up idea generation or focused top-down management.[[When is push or pull appropriate for innovation orgs?]].

The discovery of the [[Cosmic Microwave Background]] is of course, the exemplar of this operational mode. Penzias and Wilson were originally tasked to do something useful (experiments for satellite communications)  but had the bandwidth to run to (back)ground the reason for the persistent noise they picked up. It’s easy to imagine that on one hand, they might not even have been pointing the telescope at empty space if they weren’t working on the larger satellite system. (As trained astronomers I assume they would be looking at something more interesting.)  On the other hand, if they were under extreme pressure to get the project done or publish a paper about satellite communications they could easily have written off the noise as problematic equipment. 

This balance between pressure and [[Slack - concept]] resembles how [[DARPA does multiple levels of top-down problem generation and bottom-up solution generation]], both between directors and PMs and then between PMs and performers. The similarity suggests that that it might be an effective framework for approaching Pasteur’s Quadrant ([[Quadrant Model of Scientific Research]])  in a way that can enable Bohr’s quadrant type discoveries. 

There are a couple tactical upshots for innovation organizations in general. One is the fact that light management ([[Bell Labs management was extremely light]])  is actually structural. Another is that a major role for people higher in the hierarchy is to make problems as legible and precise as possible. Legible problems both shove people out of a comfort zone but give them the room to discover the unexpected. [[Legibility enables action]] 

### Related
- [[Why is there so little slack in mission-focused research?]]
- [[Bell Labs didn’t have a unique model]]
- [[Why hasn’t Bell Labs been replicated?]]


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The linear innovation pipeline is more harmful than useful

In the past, corporate labs filled a particular niche in the innovation ecosystem

We need new institutional structures to fill the role that corporate labs once occupied

Cross-disciplinary real research conferences are underdone

weaverNSNotesOfficer1946

# Bell labs brought many disciplines together under the same roof and broke down barriers between them
![](../BearImages/49C9C0B5-5CBE-44E8-A119-21B93991E3B4-4422-0008044899775BD3/IMG_0136.jpg)
Solid state physics at Bell Labs absolutely had the flavor of [[Antedisciplinary Science]] - it would be hard to know a-priori what could come out of mixing theoreticians and experimentalists, physicists, chemists and metallurgists. It’s important to note though, that everybody still was a specialist. The interaction mode has the flavor of each party learning enough about the others’ discipline to communicate, but still a strong division of labor. 

- ![](../BearImages/AF236245-AA68-48A1-8B64-950D428DE926-4422-0008044E0EAF5BD1/1B1F5A77-4928-4950-A32F-3FEE11176C31.png)
- ![](../BearImages/D2208916-1046-4909-B6F1-F8223676EF5A-4422-0008044E0EC0358C/IMG_0146.jpg)
- ![](../BearImages/9AF601AD-3758-4DC5-B857-834D88AB9425-4422-0008044E0EE3ED11/IMG_0163.jpg)
Bell Labs *physically* broke down the barriers between disciplines through the design of its spaces. You get strong Pixar vibes with how the architecture encouraged interaction - connected buildings and a central cafeteria. [[Architecture matters for creativity]].  The “no closed doors” culture augmented the physical barrier reduction.

  The physical barrier reduction stands in contrast to Universities, where departments often occupy different buildings. You don’t cross the street to another building unless you have a clear purpose, but when exploring ideas you don’t often have a clear purpose until you’ve had a chance encounter and chatted with someone. 

- ![](../BearImages/B9E3F81E-B2A8-41DB-B2E5-44DC2163A3E7-4422-0008044E0ECEBBA8/IMG_0153.jpg)
Arguably, most of the ideas and technology that came out of Bell Labs could not have happened *without* disciplinary mixing. 

![](../BearImages/E7D52B67-CEEF-4474-B3AD-B5EFB46D7BA8-4422-00080451783B386C/IMG_0191.jpg)
In addition to subject-based and experimental/theoretical mixing, there was also what I would call “stage mixing.” That is, a theoretical physicist could go talk to not only other researchers but someone who worked on manufacturing products at scale. This sort of disciplinary mixing is underrated. It is, I suspect, what enables [[fillerFundamentalManufacturingProcess2020]] and enables the [[The linear innovation pipeline]] to have feedback loops. [[Manufacturing is important and often ignored]]. [[Prototyping needs manufacturing in the room]].  

![](../BearImages/9F1D8326-23A4-4FDE-85F7-DF1500A80240-4422-000804542D26992D/IMG_0260.jpg)
The disciplinary mixing happened *both* from the bottom up and the top down. The open door policy encouraged people with questions and ideas to go and seek out the relevant people to talk to and [[Bell Labs management was extremely light]] so they didn’t need to ask permission. At the same time [[Mervin Kelly]] strongly endorsed culturally and physically bringing different disciplines together. My hunch is that both of these pieces were necessary.  

### Related
- [[If something needs to be integrated into preexisting systems or manufactured, a pipeline into those systems is important]]
- [[New manufacturing paradigms can remove bottlenecks for other paradigms]]



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# Bell labs existed before continuous improvement was expected
If AT&T wanted its system to improve, it needed to be that change - it wasn’t going to happen by just sitting back and waiting. And similarly, that change was probably going to look different than the changes that had come before.  [[Continuous improvement shifts how people think and act]]. 

[[Alignment requires existential threats]]. 

Predating the “continuous improvement” regime is not unique to Bell Labs. [[Bell Labs didn’t have a unique model]]. However, it does stand in contrast to any institution that we could create today. It’s important to call out this shift in context because it means that any organization starting today needs to take it into account. [[It is worthwhile to try to replicate outliers]], but you need to consider what is different in doing so. 

### Related
- [[Bell Labs didn’t have a unique model]]
- [[odlyzkoDeclineUnfetteredResearch1995]]
- [[Continuous technology improvements]]



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A 1B dollar PARPA budget could come from a 25B dollar endowment at 4 percent interest

# Bell labs had a budget of 2.8 billion 2020 dollars
# Bell labs had a budget of 2-8 billion 2020 dollars
![](../BearImages/6BA12AC4-9ACA-43B0-8664-E1BDC8DBF24E-79004-000F2D328EC0FFEA/C4F299A2-7375-4213-A068-03F7AEE2C420.png)
(The above is from [[gertnerIdeaFactoryBell2012]]) In 1930 Bell Lab’s budget was ($1930)19M (which is ($2021)297.6M)  [[The making of American industrial research : science and business at GE and Bell 1876-1926]]

`In 1974, for example, Bell Labs spent over $500 million on nonmilitary R&D, or about 2 percent of AT&T’s gross revenues. Western Electric spent even more on its internal engineering and development operations. Thus, more than 4 cents of every dollar received by AT&T that year went to R&D at Bell Labs and Western Electric.`
From [[The End of AT&T]] 
In 1974 Bell Lab’s Budget was ($1974)500M which is $2.8B USD

That is a lot of money, but it’s important to consider that [[The famed bell labs research was a fraction of their activity]] - a lot of that money was actually going towards practical, incremental developments like better cable sheathing. 

Also by comparison, [[Microsoft]] spent $19.6B on R&D in 2020 on a revenue of $147B which is actually a larger % than bell labs. [[Google]](Alphabet) spent $27.8B on a $171B revenue. To get a sense of a company that is not based on bits, Corning spent $0.99B on R&D with a revenue of $11.29B.  

It’s also important to compare the Bell Labs budget to AT&T’s *profit* of $18B [Competition and Ma Bell - The Washington Post](https://www.washingtonpost.com/archive/opinions/1977/02/27/competition-and-ma-bell/78eaaf3a-e0d5-4174-8684-32e993dfa15f/) and a revenue of $88B. Bell Labs represents a larger fraction of AT&T’s budget than DARPA does of the DoD’s budget.  [[According to DARPA Website, DARPA budget  was $3B which was 0.5% of the $617 Billion DoD budget]]. The two  things to keep in mind in this comparison are first that DARPA only gets things to the prototype stage and the DoD spends much more money on product development in other organizations and that Bell Labs got some of its income from the operating companies that paid into AT&T rather than AT&T itself so that $5B may not have come directly out of the $88B.

### Related
- [[Bell Labs was only profitable in conjunction with AT+T]]
- [[Bell Labs was not a business]]



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Research orgs don’t scale

The famed bell labs research was a fraction of their activity

# Bell labs was primarily not researchers
It’s easy to focus on the researchers at [[Bell Labs didn’t have a unique model]] like Shocklee, Shannon and others. However, the majority of people there were engineers doing much more mundane things like assembling and testing equipment. 

The things we think of as massive wins are hits that happened over ~50 years of operation. This is an absurd organizational time scale.

When [[Bell Labs]] began, only about 15% of its employees did research.  `Of the two thousand technical experts, the vast majority worked on product development. About three hundred, including Clinton Davidson and Mervin Kelly, worked under Harold Arnold in basic and applied research.` 
Arguably, the things we lionize Bell Labs for probably not have been massive wins *without* people around who were deeply entrenched in manufacturing processes and products.    [[Prototyping needs manufacturing in the room]].

![](../BearImages/15308501-2B47-4D6A-9EF5-114E41422B7F-4422-000801672A7AF48D/IMG_0214.jpg)
On top of all that there was pretty clear status inequality between the people working on sexy research and the people doing development. This inequality is one of the reasons <name redacted> argued that [[At the organizational level corporate R&D labs either cause brain drain or don’t have the best people]] . Bell Labs may have routed around this slightly by being a completely separate entity from AT+T. However, it’s not clear to me how it maintained a strongly hierarchical system for decades. 

Some possibilities are that people could move from development into research if they were good enough. Another possibility is that there were legitimately two prestige tracks you could move through and while development was more salt-mine-y in the beginning, you could end up doing bigger things; [[Chuck Elmendorf]] ended up directing both the transatlantic cable project and the waveguide project. Another possibility is that alternatives were less good - now unsatisfied Bell Labs developers could just go off and start a startup. Yet another possibility is that, like Google today, the compensation was good enough that even if the work wasn’t the most prestigious within the organization, it was stable and the money was good and you might not need the crazy outliers in these development roles. 

There are two key upshots here. One is that you need more than just researchers to get impactful technology out into the world. Either these people need to be part of the organization or you need to plan a clear way to interface with them. The other (related) upshot is that there is a lot of grunt work that needs to be done to actually build impactful technology. Incentivizing that is *hard* short of the money you would make starting a company. It’s worth thinking deeply about how to tackle that. 

### Related
- [[The famed bell labs research was a fraction of their activity]]



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Healthy corporate R+D requires a trifecta of conditions

Why hasn’t Bell Labs been replicated?

Why doesn’t the US government treat Google, Facebook, and Amazon the way they treated AT&T?

# Regulation drove many of Bell Labs’ actions
AT&T maintained their monopoly only with tacit approval from the government. This approval rested heavily on Bell Labs’ output - both continuous improvements to AT&T’s offerings and open licenses from the lab. 

![](../BearImages/32CB28E9-C907-4B60-BA16-9E43543555A6-88049-000786A139B67224/IMG_0114.jpg)
The “government approved monopoly” was basically a self-preservation tactic that [[Theodore Vail]] employed to prevent AT&T from anti-trust lawsuits in the early 20th century. As noted in [[gertnerIdeaFactoryBell2012]], a key to this was the perception that AT&T was working on behalf of Americans, and a big way that happened was from a stream of improvements coming out of [[Bell Labs]]. 

![](../BearImages/844869D5-1F58-4709-82F5-ED4A50A645DE-88049-000786C17D1257EA/IMG_0129.jpg)
Avoiding anti-trust was a strong incentive for AT&T to improve its services both in terms of quality and price, which they achieved through technological improvement at Bell Labs. It seems fairly straightforward to measure the price and quality of a telephone system. By contrast, many of the modern monopolies have much less legible products. While Google, Facebook, and Amazon are continuously *changing* and *adding to* their products, it’s much harder to say whether they are *improving* them. It’s not germane to this note, but it’s worth wondering whether software products price and quality could be measured better and what the result would be. Of course, beware [[Goodhart's Law]].

![](../BearImages/1D866F87-6421-42F5-8232-84CCFA4A7B75-88049-000786C703E9E7CC/IMG_0212.jpg)
The pressure from government waxed and waned. Arguably, some of the most valuable of Bell Labs’ outputs (modern electronics and computers) happened because of particularly intense pressure in the 50s. The counterfactuals are intriguing. What would have happened if Bell Labs hadn’t opened the licenses and gone out of their way to help other people understand and use transistors? Arguably transistors are one of the exemplars of [[There is a significant class of innovations that would create drastically less value for the world if their value had been captured by their creators]]. [[The work at Bell Labs that was most valuable to AT+T and the work that was most valuable to the world was fairly disjoint]].  

![](../BearImages/B11118F9-527B-4E8B-A310-F79C420D5511-88049-00078A3FF6F76C4C/IMG_0246.jpg)
Bell Labs could only begin work on mobile phones once the FCC released the spectrum for it.

![](../BearImages/65C5B9BF-6C79-4AB9-84FB-744EA3DFB9A7-88049-000786D180820867/5082BE7F-5871-43BC-B95A-782C111B1E5E.png)
![](../BearImages/A3A06F11-C10D-47F5-8EA5-941EBFE932F6-88049-000786CC30315F9D/IMG_0188.jpg)
It’s easy to think of Bell Labs researchers as being totally unfettered but [[Bell Labs did not give researchers complete freedom]]. One of the boundaries on exploration was driven by concerns over regulation, as illustrated by the pressure on Shannon when it was hard to justify that his work was tied to communication.[[It’s hard to know exactly where a line is until you cross it]]. This incident is an important case study because it emphasizes that Bell Labs was still behooven to the rule that [[Innovation orgs need to be aligned with their money factory]] and [[Alignment requires existential threats]], it’s just that the existential threats came from different places than for many modern organizations. 

Regulation’s influence on Bell Labs’ output raises some questions about the relationship between regulation and technological development in general. My bias is to lean towards the view that “regulation bad.” See [[Regulations slow down technological advancement]]. However, I find it hard to argue that the world would be a better place without the regulatory pressure on AT&T. Would it have poured as much money into Bell Labs? I suspect not. Either it would have maintained its monopoly and kept more of the profits instead of plowing them back into research (which didn’t help it maintain monopoly in the absence of regulatory pressure) or competition would have forced AT&T to think on shorter timescales, leading to adverse incentives on Bell Labs’ outputs. Bell Labs is figure 1 in the argument that the relationship status between technological development and regulation is “it’s complicated.” One tentative thought is that the beneficial regulations on Bell Labs were for the most part focused on the company, rather than the technology. 

### Related
-  [[Some 80’s deregulation may have been a bad thing]]
- [[Regulations have increased by an order of magnitude]]
- [[Regulation should lag innovation]]



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Bell labs was primarily not researchers

# The famed bell labs research was a fraction of their activity
When [[Bell Labs]] began, only about 15% of its employees did research.  `Of the two thousand technical experts, the vast majority worked on product development. About three hundred, including Clinton Davidson and Mervin Kelly, worked under Harold Arnold in basic and applied research.` [[Bell labs was primarily not researchers]]

Most of the work was to create [[Continuous technology improvements]] - better telephone poles, more efficient vacuum tubes, cheaper cable sheathing. 
![](../BearImages/41F31536-F5AF-437F-8B31-5AD9A71C7A79-88049-0007549E75488A0A/IMG_0250.jpg)

For curiosity, I kept track of every single named employee mentioned in [[gertnerIdeaFactoryBell2012]] - there were 64 of them. Sixty-four people over an approximately 70-year period, in an organization that employed thousands of individuals from day one. Obviously this number is skewed smaller by the narrative constraints of a book, the tendency to over-concentrate attribution on a few individuals, and the limits of historiography itself. Obviously hundreds of other people - technicians, support staff, managers - were crucial to the projects. However, it does mean that even within minority of people at Bell Labs doing research most of the work was not particularly notable.

There’s a question of counterfactuals - could you have gotten the output of  Shannon and Shocklee without an organization the size of Bell Labs? Some parts were presumably irrelevant (the guys trying to eke the last 1% out of vacuum tubes? The guys figuring out how to make telephone poles last 5% longer?), but it is incredibly hard to say from from the outside, and may have been hard from the inside. I can only assume they didn’t support projects they *knew* to be worthless.  The issue is that even on top of having the tacit and manufacturing around to act on the ideas we today recognize as valuable, [[The work at Bell Labs that was most valuable to AT+T and the work that was most valuable to the world was fairly disjoint]]. The latter subsidized the former.  

This is an uncomfortable reality because it slams you in the face with the fact that [[Sturgeon’s Law]] applied even in arguably the most optimal situation possible - a monopoly whose massive profits literally depended on better technology and plowing some of the profit back into flashy research. 

### Related
- [[Seen vs Unseen]]



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# The work at Bell Labs that was most valuable to AT+T and the work that was most valuable to the world was fairly disjoint
The work at Bell Labs that made it legendary - the transistor, satellite broadcasting, cell phones, information theory - did not generate a ton of money for AT+T.[^1]  The work that made AT+T money were the [[Continuous technology improvements]] that made telephone poles and vacuum tubes last longer, made telephone easier to use, and slowly improved the sheathing on telephone cables. These small changes added up at scale to save AT+T billions of dollars and convince more people to join their network. [[Bell Labs was only profitable in conjunction with AT+T]]. 

Arguably, the ‘shiny’ work was still valuable to AT+T because it burnished their image as an all-American center of invention and technology which kept anti-trust regulation off of their back. 

The upshot is that without that pressure, there would have been much less incentive for AT+T to support the work at Bell Labs that we now lionize it for. The disjoint between the locally and globally valuable inventions also makes me skeptical of plans to ‘build the next Bell Labs’ that don’t take this into account and assume that if they do great work, they will be able to capture its value. [[There is a significant class of innovations that would create drastically less value for the world if their value had been captured by their creators]].

### Related
- [[It is hard to capture value from research]]
- [[Creations whose impact depends on being public generate uncertain value through not-particularly modular combination with many other things and have a large combinatorial surface area]]

[^1]: Arguably information theory did because it let them cram more phone calls in the same telephone lines. 

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The Idea Factory

# Was Bell Labs an anomaly?
# Was Bell Labs an anomaly
### Related
- [[Why hasn’t Bell Labs been replicated?]]


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Was Bell Labs an anomaly?

# Why hasn’t Bell Labs been replicated?
# Why hasn’t Bell Labs been replicated
Is this actually true - could you argue that PARC was a replication of Bell Labs?
- [[Regulation drove many of Bell Labs’ actions]]
- [[Conversation with Daniel Windham 31/10/2019]]

### Answer
My answer is that no R&D labs *working on physical technology* meet the conditions  necessary to create a high-quality corporate R&D lab. [[Healthy corporate R+D requires a trifecta of conditions]]. Note that [[AI research is an exception to the decline of corporate R+D]]. 

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