It is hard to capture value from research

# Do patents work better when firms are smaller or more uniform size?
# Do patents work better when firms are smaller or more uniform size
[[Lever of Riches]]


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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

Most tech transfer offices are not profitable

List of hard things

Pay-it-forward tithing is underrated

Enabling technologies must be developed while doing serious work

Bell Labs was only profitable in conjunction with AT+T

Value capture does not always need to happen through IP

Legal structures are intimately tied to the question of how money works in an organization

It is especially hard to capture value from externalized 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

Research requires intrinsic motivation

Can the ARPA model exist outside of the government?

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

Things that are not paper-worthy enough for academia and not product-focused enough for a startup

There are many important innovations that are just bad investments

Profit-maximizing organizational structures can hamstring technologies whose impact depends on them

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

ICT Distillation

An Institute for Creative Technology - Riffing on ARPA

IBM spent years creating copper interconnects

ICT Outline

Omniscience is not enough

Research Blockchain

# It is hard to capture value from research
Abstractly, a lot of research tends to resemble a public good. (See [[Scientific Knowledge as a Global Public Good - Contributions to Innovation and the Economy]].)  Technically, knowledge is a non-rivalrous good. Your knowledge of airplane building does not prevent me from knowing how to build an airplane. Once knowledge is no longer secret, it generally becomes non-excludable as well. These properties make the outputs of research look a lot like public goods by default. 

[[Value capture is important for incentivizing and funding research]]. The primary way to capture the value of a public good is to privatize it. [^1] However, privatizing research is tricky. [[Current value capture mechanisms are crude]] - to capture value from research, you need to either patent it *and get paid* or build a product around it. Researchers and research organizations can also indirectly capture some of the value through credit and status that can convert to consulting gigs and speaking fees. Let’s walk through the challenges with each of these mechanisms.

### Patents
 Patents only apply to research that directly goes into a product - often there is a lot of work (and failures) by *different people* that leads to the patentable research. [[We stand on the shoulders of too many giants to give them all credit]] so it’s hard for people who pave the way for research to get a kickback from patents. Large R&D labs amortize some of this work, but the modern system of startups and academia fractionalizes the work and weights the rewards towards the people at the end of the chain, for better or worse.[^2] Research often needs to be combined with *other* research to create something really valuable. Often patenting terms are so rigid that the cost of licensing multiple patents to develop a new product kills it in the cradle. [[Patents inherently prevent a piece of IP from being combined with other knowledge]]. 

 Finally, capturing value with a patent is often widely inefficient. In an ideal situation, someone building a product that incorporates the patented process comes to you, the two of you negotiate a licensing deal, and they send you a check every year. The world is not ideal. Often, you need to *find*people who are violating your patent and threaten to sue them if they don’t pay up. Standard lawyer advice when building something is to *not* look for prior art because it decreases your liability in case you happen to reinvent something. Even if someone *does* come to license your patent, the negotiation over licensing terms can be brutal - there are no standard terms and especially for a startup it can create a drag chute on a product’s profitability that makes an already hard job even harder. Once the licensing agreement is signed, you still need to make sure that the company is paying you the royalties you’re due and sue if they’re skimping you. Many inventors have spent a lot of their lives in court over patents and sometimes wind up dying in the gutter in spite of that. 

### Products
 In order to capture research value through a product, the research needs to make a single product (significantly?) better than its alternatives. If it’s modular enough that it can easily be sold and incorporated into many other products, that’s still just a product. Products rarely succeed on the quality of their new technology alone. 

Additionally, products are coupled to companies so there are many other factors that affect the value captured by the researchers besides the research itself, or even the product. Markets, sales channels, margins, fundraising, perception, etc. all make or break companies independent of their products.  [[The best technologies don’t always win]].  

This is all to say that just as it’s a long and windy road *to* a productizable piece of research, it’s also a long, windy, and narrow road to successfully productizing that research. Arguably, the work to productize the research is equally or more valuable than the research itself. 

A side note: Pharmaceuticals are unique in their productizability. It’s easy to trace new molecules back to the scientists in the lab and those molecules are patentable. Drugs demand is relatively little work to go from research to a product. You don’t need to worry about design, usability or specific use cases when taking a drug to market.  Scaling, manufacturing, and tweaking are of course hard and should not be ignored. If the drug does what it says there is close to zero market risk - people don’t like to die. The intertwined standardized FDA approval process combined with the Pharma-insurance complex means that there is almost no channel risk either. This is all to say that pharmaceuticals might not be the best exemplar for capturing value from research. 

### Indirect Value Capture
 Researchers can also capture value from their research by consulting with companies who could benefit from that research, getting speaking fees, selling books, and just generally acquiring social status. While in ways this can be good because it encourages people to spread knowledge as far and wide as possible, those same forces also incentivize exaggeration, sensationalization, and at worst, falsification (see: replication crisis.) It also pushes research to try to grab all the credit for themselves - instead of trying to create a monopoly on the research itself, researchers can capture monopoly rents on research credit. [[Value capture does not always need to happen through IP]].

### Is uncapturable value actually valuable? 

One could make the argument that if a piece of research doesn’t lead to a valuable product or patent then it isn’t valuable itself. While [[Someone needs to buy manufactured technology eventually in a monetized economy]], there are *many* pathways by which research can eventually end up in those products. Some of those pathways might enable researchers to capture value with [[Better value capture mechanisms]](science coin!) I would argue that the value of other pathways are inherently uncapturable.

There are many pieces of research that would make many products a little bit better but not enough to be worth the overhead of a patent and licensing, and they aren’t modular enough to be a product in and of themselves. Imagine a manufacturing tweak that saved thousands of companies $100 over many years. Valuable, but not enough to license on either side. This situation might be remedied by better mechanisms. 

Some impactful research resembles [[Problems where it is easy to know whether an answer is correct but hard to get to that answer]].  This situation applies to a lot of design work and best practices. Arguably you could patent these, but the work to hunt down and sue everybody who used it would require massive resources and perhaps just lead to people taking the hit and not using it in the first place. It’s questionable whether better mechanisms could help here, though you could make an argument that in the same way that the iTunes Store drastically decreased piracy, better mechanisms could make it easier to give kickbacks. 

[[We stand on the shoulders of too many giants to give them all credit]] - research often follows circuitous routes and sometimes it’s not even clear who you’re building on or you are separated though so much time that it’s impossible for them to capture some of the value they create. If you build a product with the help of a fifty year old paper, do you give some royalties to the author’s heirs? 

While it’s not strictly uncapturability, [[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]]

There’s also just a lot of value that doesn’t turn into money. How would even the most sophisticated IP mechanisms have made [[Norman Borlaug]] a bajillionaire? 

While better value capture mechanisms may help, we also need better social technology ([[Pay-it-forward tithing is underrated]]) to fund and reward research that is truly a public good. 

### Related
- [[Patents have become more BS over time]]
- [[Do patents work better when firms are smaller or more uniform size?]]
- [[Market failures are actually failures of the existing institutions to allow markets to work]]
- [[Market failures are coupled to externalities]]
- [[§PARPA]]
- [[Michael nielsen re david d value of creative work twitter]]
- [[Is it possible that there are just different scales that value capture can happen on?]]
- [[You need a certain scale for technology development to be worthwhile]]

[^1]: [[Value capture is a utilitarian fantasy]], but it does encapsulate a lot of practical concepts around incentivizing and funding things that I (and hopefully many other people) want more of in the world. 
[^2]: [[Research should be treated like infrastructure]]



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Institutions shape how individuals interact

Bessemer Process

Structural Constraints

Technology Solves Problems

§Type I and Type II Progress

Government monopolizing any role is dangerous

Knowledge of how markets and innovation work has made us jaded

Macroinventions are the tail end of the impact power law distribution clashing with our intuition

Federated systems make it so disruptive changes cannot be completely damped out

Permissioned and Permissionless Progress

Higher capital costs encourage larger firms

Type I and Type II Progress - publishing version

It is important to have many pathways for the same ideas to become reality

Why didn’t new husbandry techniques occur until 1500?

In the long run Type II progress cannot exist without Type I progress

Tea clippers vs Steamships

Do patents work better when firms are smaller or more uniform size?

Consistent areas that matter for human progress

People who are directly affected by the change often impede progress

Early 21st century software engineering resembles 17th century mechanics

Are we not creating some things because of cultural values  the same way the Greeks and Romans did?

Fibonnaci both discovered the Fibonacci sequence and imported arabic numerals

Has anybody come up with a good theory of risk aversion focused on innovation?

How does Mokyr’s Invention and Innovation compare/contrast with Invention and Discovery?

How does the definition of invention in Lever of Riches compare with the definition in Cycles of Invention and discovery?

How much does hope matter for technological progress?

If new knowledge is combinations of other pieces of knowledge, can macro inventions in the mokyr sense exist?

Is the gap between best practice and average practice described in lever of riches during the renaissance still the case?

Many inventions and discoveries seem to come from clerics

Urbanization of humanity has not been monotonic

What are the implications of the definition of invention in Lever of Riches?

What does it mean to be 100 years behind technologically?

What was Robert Mushet’s thought process when he figured out how to improve steel?

Which inventions does the dispensability axiom not hold for?

Why didn’t the romans create lateen sails?

Why was Europe slow to adopt paper?

Why was the breast wheel not invented until the industrial revolution?

Why was the separation of silver from copper ores so important?

Why were rails necessary for railroads (ie. Why didn’t they just invent giant steam powered carriages?)

Why weren’t buttons invented in Asia?

“Applied knowledge” might be a better term than “commercialization”

# Lever of Riches 
# Lever of Riches 
- p9 Herjee asserts that technological change cannot be explained by standard economic theory of rational choices subject to known constraints
-  “Technological change involves an attack by an individual on a constraint that everyone else takes as given”
- Francis bacon asserted that there were two kinds of inventions
	- Inventions that required all the current state of knowledge
	- Inventions that could have been invented at any time. Hard to know whether these were pushed by unique external circumstances 
		- Wheelbarrow
		- Stirrup
- Mokyr asserts that telling the difference between the two is hard
- p10 Mokyr defines inventions as “an increment in the set of the total technological knowledge of a given society, which is the union of all sets of individual technical knowledge”
- Unapplied knowledge makes no difference to economic welfare
- “At any moment there is a large gap between average and best practice technology; reducing this gap by disseminating the techniques used by producers at the cutting edge of knowledge is technological progress without invention.”
- “without further increments in knowledge, technological diffusion and the closing of the gap between practices will run into diminishing returns and eventually exhaust itself”
P11
- Invention and Innovation are compliments 
- Invention is an individual act and depends on things that affect individuals
- Innovation is a group act and depends on things that affect inter-individual interactions 
- Technological invention involves getting the environment to yield secrets and then manipulating those secrets.
- Three conditions for technologically creative society
	- Challengers: resourceful people who are willing and able to challenge environment for their own improvement
	- Incentives for the challengers to do their work
	- Openness to new things
P12
- Conception of a technology is important even though there is a learning process where costs decline
P13
- Microinventions are the “small incremental steps that improve adapt and streamline existing techniques already in use, reducing costs, improving form and function.
- Macroinventions are where “a radical new idea without clear precedent emerges more or less ab nihilo”
- A dispensability axiom is of the form “if X had not Y, it would have been done by Z”
- The dispensability axiom holds for some inventions but not others
	- incandescent Lightbulb
	- telephone
- Mokyr claims the dispensability axiom does not hold for many inventions
P14
- Analogy - both privates and generals are important but saying “Napoleon won the battle” is a useful shorthand
P15
- Whiggish interpretations of history are ones where it is a story of progress
- People’s ability to manipulate nature has increased
- Costs of bundles of goods have decreased
P19
- Greeks and Romans had different views of technological success and progress and did well on their metrics
- Early Iron Age (1100-500BC) saw a ton of invention 
	- iron
	- lathes, saws, pegs
	- shears
	- scythes
	- axes
	- picks
	- shovels
	- rotary quern
	- Ships 
	- wagons
P21
- Hellinistic inventors pioneered “machines”
	- lever 
	- wedge 
	- screw
- Simple machines were used in war but few other places, even though the same principles were used thousands of years later
P22
- Hero of Alexandria created
	- Aeolipile - steam engine used to open temple doors
	- Coin operated vending machine for holy water
	- Dioptra - similar to modern transit for surveying
	- combined theodolite with the level
- Ctesibius (3rd c bc) 
	- hydraulic organ
	- metal springs
	- water clock
	- force pump
P23
- “The binding constraint on metallurgical technology was the inability of ancient blacksmiths to produce iron at temperatures high enough for casting”
P26
- Celts invented many things
	- Harvesting machines
	- Barrels
	- enameling
	- spoked wheel
	- soap
	- advanced ironworking
	- pegs to function as bearings
-p31
- Middle Ages culture continued to not prioritize invention
	- “The upper classes devoted themselves to the subtle art of hacking each other to pieces with even greater dedication than the romans had”
- p32 
- Pulverizing soil prevents evaporation and brings subsoil minerals to the surface via capillary action
P41
- Shifting the sail spar over the mast during tacking prevented the romans from building larger ships using fore and aft riggings
- Lateen sails solved that problem and allowed ships to sail 65 degrees off the wind
- Penetration of paper into norther Europe was slow (took until 13th c.)  even though Muslim world was using it a lot
P48
- Claims “A process to separate silver from copper ores by means of lead, developed around 1450, was the most important discovery of this age”
P50
- Diagram of weight driven clock
P51
- Clocks created a the concept of communicable facts and concepts (“I-see-what-you-see” information diffusion)
P54
- Buttons created in 1230’s in Germany
- Buttons never invented in asia
P55
- Innovations (esp chemical) were created with no theory of how it worked and for the most part with an intention to do alchemy.
	- `Progress was attained by thousands of forgotten tinkerers and craftsmen, often replicating each other, many of them wasting their creative energy in the fruitless pursuit of alchemy and other dead ends`
P58
- Many inventions were imagined in 1500-1750 that couldn’t be executed on
- New husbandry techniques led to increased output in 1500-1750
P59
- The “dutch” plow was patented in England :troll:
P65
- Technical literature emerged from how-to books after 1450 - first time engineers were writing for other engineers
P66
- technical literature described machines that were state of the art more complex or expensive than most people could build
- hard to adapt machines between sites because of lack of skilled labor
P69
- British bounty for building an accurate clock that could be used on a ship to find longitude had a bounty of 20000 lbs in 1714. 
- The bounty wasn’t claimed until 1762 by John Harrison
P72
- 17th century instrument making involved apprenticeship, making their own tools. Art not science.
`Instrument making in the sixteenth and seventeenth centuries was an art, not a standardized technique. Most imporvements were the result of serendipity and trial-and-error searches. Learning and training took place mostly through apprenticing and informal contact. Mechanics had to build their own parts and often the gap between the visionary who saw what might be done and the craftsman whose material and tools limited what could be done was too wide to be bridged.`
P73
- The renaissance was unique because people doing science also created technology. 
- Before the rennaisance there was a distinction between thinkers and makers.
- After the renaissance there was the distinction between scientists and engineers.
P74
- Arabic numerals were introduced by Leonardo Fibonacci of Pisa in the book *Liber Abaci* in 1202.
- [[William Oughtred]], the Rector of Albury in England created the slide rule in 1621
P76
- 1588 - Giambastia della Porta created an egg incubator which he stopped after the inquisition clamped down. The technology was continued by a dutchmen and a frenchmen.
- Huegonauts were technically skilled and were kicked out of France which led to one helping Huygens invest the steam engine in Holland.
P77
- Manufacturing moved to the countryside in 1500-1750 because of guild restrictions on technological progress.
P83 
- There is no settled definition of the industrial revolution
- Wrigley proposes that it was a substitution of inorganic for organic materials
- Cipolla proposes that it is an increase in energy inputs and a focus on steam
- Paulinyi proposes that the industrial revolution was a focus on machines instead of hand tools
- Many different things were improved that actually had few things in common
- Some industries changed a lot and some not at all
- Technological innovation revolved around individuals in the industrial revolution
- <quote about characteristics of innovators> 
91
- The breast wheel was more efficient than the overshot and undershot waterwheels
P93
- Cort combined a number of innovations together to create a better process for making iron in 1784
P95
- `The product that resisted innovation most stubbornly was steel` 🥰
P98
- The self-acting mule was adopted extremely slowly despite obvious advantages because 
	- they were expensive and sources of capital were scarce
	- self actors were good for lower quality yarn until 1860
	- Non-self acting mules needed skilled ‘minders’ who would not need to be skilled
p106
- The foudrinier machine reduced the time to make a piece of paper from 3 weeks to 3 minutes
P109
- Gas lamps had little direct impact on wellbeing but a huge impact on wellbeing
- The first commercialization of gas lighting was a single factory owned by the company that bought the patent to the lamp
- Aimé Argand put together the different pieces of knowledge for the gas lamp in the early 1780’s
- Argand died poor because there was no way to prevent imitation of his lamp 
P110
- Mining output in the industrial revolution increased because there were more resources devoted to it, not better tech. The demand curve did not change shape.
- Ballooning (1783) had few economic impacts but large effects
P113 
- In the 1800’s`The number of technological breakthroughs that were purely empyrical did not decline though their relative importance did `
P114
- Increasing returns to scale (which happened in the 19th century) changes the way we think about research, development, diffusion, and adoption.
P115
- Structural constraints occur when you have multiple pieces interacting in a complex system
- Before the 19th century, most technology stood as discrete chunks. After the 19th century it became a complex system.
- Paul David asserts that in complex systems, certain components will hold back the whole system because those components need to comply with existing standards.
- Ships are some of the first examples of these complex systems. 
P116
- Pooling resources to purchase high capital cost equipment gave rise to larger firms
- [[Henry Bessemer]] figured out the [[Bessemer Process]] for making cheap steel through inspiration from another source.
P117
- The bessemer process was simultaneously invented.
- Mokyrs explanation for simultaneous invention is that `a problem was defined jointly by a perceived market need and by the tstate of the art as defined by previous inventions and accumulation of knowledge` and that the two inventors may have had 2nd or 3rd degree connection
P121
- systematic research was needed to make new chemicals
- the people doing this systematic research needed to be protected from short term demands for practical results
- State sponsored research in the mid 19th century in Saxony  was necessary for better results because of the need for long term systematic research
- This was especially focused on agriculture 
129
- tea clippers were the peak of sailing ship design and could achieve speeds of 15 knots
- steam ships displaced sailing ships on short routes but needed longer to overcome all their problems
P 130
- `The optimal design of the bicycle was difficult because the attributes of the bicycle spanned a number of dimensions: speed, comfort, safety, elegance, and price were all considered and had to be traded off against each other.`
P 133
- Parsons and Gustav de Laval simultaneously invented the steam turbine solved the problem that reciprocating compound steam engines could only develop so much speed.
- More than 200 patents had been filed for steam turbines already.
- Mokyr uses this as a warning against generalizing that things emerge when the time is right.
P 144 
- Wireless telegraphy is an example of science leading to invention
- Telegraphy was implied by Maxwell’s laws
P 146
- The “Leonardo problem” is that `Gadgets and devices can be conceived that are known to be possible but cannot be built efficiently because supporting technologies are lacking`
P 147
- claims that only technological progress can support sustained growth because it doesn’t suffer from diminishing returns
P151
- Pushes back on the idea that “necessity is the mother of invention” and cites counterexamples and authorities who agree.
P152
- Mokyr rejects the fact that higher incomes determine which technologies are created
- Culture matters because there are high costs to adopting technology and the more the cultural barriers the less people will be to bear those costs
P155
- A ‘Crusoe Game’ pits players against nature (Neumann and Morgenson) 
- Technology is a Crusoe game at first  
- White: `A group can conceive nothing that is not first conceived by a person`
- Rudolf Diesel: two phases of technological progress - first the creative inventive part and then the part to drive adoption
P158
- Risk aversion plays a role in where technological progress happens but there are no good theories for it
P169
- Examples of successful inventions based on incorrect theory
	- Hot air balloons
	- Chlorine bleaching
	- Steel making
P178
- Technology is often resisted because the benefits are diffuse and the harms are acute 
P180
- most autocratic rulers in history have been anti technology
P182
- Asserts that government sets the cultural attitude towards non conformists
P189
- Argues that islam and judaism adopted the attitude that challenging previous knowledge was sacriligeous 
P196
- Constantine and Diocletian tied people to the work of the forefathers 
- Mokyr attributes the reforms of C and D to declining technological progress in late Rome
- Often argued that a gap between the people who work with their hands and presteige hurts progress
197
- Management and ownership were separated in the classical period which led to misaligned incentives and lack of invention
202
- Asserts that western christianity had something to do with technological change
- Gave the attitude that nature was given by God to man to do what he pleased with it 
- Technology requires a slight ‘crime against nature’
203
- Monastic orders created a small bridge between the upper classes and the people who do stuff 
P205
- once you expose creative people to labor they start making ways for that labor to go away
P227
- The argument that Chinese frame of mind is not suitable to technological advancement is weak - there was tech advancement that stopped without a huge change of culture
P232
- Needham argued that Chinese default is homeostasis and western default is instability 
- This difference may be because of cultural attitudes towards the people who are *hurt* by technological change
P233
- In china, large tech changes that would change the social order were avoided
P233
- In the west the state supported very few non-military inventions before the industrial revolution
234
- In china needed government support to do any innovation in mining (and other areas) 
- Chinese bureaucracy came to play a huge role in tech progress
	- This is possibly because of the coordination needed for rice farming and irrigation
P234
- Chinese state monopolized trade in goods and infrastructure and intervened directly in the economy
- By contrast, European government was just another player in the economy 
P237
- Innovation run by beaurocrats is dependent on their goodwill
- Valuing stability will inevitably come into conflict with technology and if there is an absolute government that values stability it will tamp technology
P241
- At the end of the 17th century Britain was technologically “100 years behind” the continent
- Many technologies converge on mining (chemistry, civil engineering, metallurgy) which makes it a good tech barometer
P243
- Britain had a unique set of human capital shaped by social structures: middle class and many closed doors to nonconformists 
P244
- Many of the British invented devices during the industrial revolution were dumb luck
P245
- Strong transportation networks in Britain made the markets large which increased incentives to invent things
- But large markets aren’t sufficient (per the example of china)
P251
- Patent systems encourage marginal inventions because they only give you the benefit for a finite time so you won’t get most of the value from a huge thing whose impact will only be latter
P254
- One reason the industrial revolution happened in Britain may be because there were not as many entrpreneurs (distinct from inventors) on the continent
- Two positive feedback loops - imitation effect where people wanted to get rich the way other people have and complementarily effect, where when more things were created more things could be created
P266
- There is some game theory that says there is a positive feedback loop that makes it less likely new technology will be adopted every time a new technology is not adopted
- Cardwell’s Law
P284
- you could model technological change as a biological process
P288
- What is progress?
- Economist definition is “the capacity of the productive sector to meet human needs relative to resources”
- This throws some questions on whether there was progress before 1850
291
- `A macroinvention is an invention without clear cut parantage, representing a clear break from previous technique`
- Although all technology has precursors, you need to evaluate the precursors on how successful they are
P296
- Technology advances at different rates in different areas
- Rapid change is less likely in complex systems (ships, mines farms)
- Rapid technological advancement is more likely when it is not location specific
P303
- History deals with what people have done - counterfactuals are hard
- Failures in tech don’t
- `By the nature of technology we rarely miss what was not invented`
### Author
[[Joel Mokyr]]


                            

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Do patents work better when firms are smaller or more uniform size?

Do patents work better when firms are smaller or more uniform size

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