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 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 findpeople 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.


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.


^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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