Friday, June 08, 2012

Counter-truisms in Anti-Trust Policy (Bell Labs Again)

The other day I offered the truism (as it seemed to me) that monopolies don't need to undertake vast and expensive programs of basic research   Example: Bell Labs.  Oh, right, bad example: Bell Labs, the offspring of Ma Bell, stands perhaps as America's innovator par excellence.

Today in the comments, reader MJH offers up the counter-truism that only monopolies can afford to undertake vast and expensive programs of basic research.  Example: Bell Labs in its salad days (1930-80), in contrast with Bell Labs and successors in decline as they cut back on research in general and cut back more particularly on basic research.

It's a fine point and the fact that these two truisms may seem to cancel each other does not vitiate the force of either.  Indeed it induces further reflection on how Bell Labs understood itself and (perhaps not the same thing) what it was up to with its research program.  So here's the nutshell: clearly, if you had asked anyone at Bell Labs what they were up to, they would have answered (as documented in Jon Gertner's splendid history).  that they were underlaborers in the service of the larger business model.  Gertner quotes  Mervin  Kelly, the executive engine behind Bell Labs,  articulated the standard for any innovative device" "it must be better or cheaper or both." In Gertner's words, "if it wasn't justifiable on economic grounds, it had to be justifiable on technological grounds."

Bell Labs saw itself, then, through a lens of almost Rotarian clarity.  Yet the great irony of Gertner's book (and Gertner gets it) is how utterly at variance is the mantra of Bell in rhetoric with the actuality of Bell on the round.  We can see this in at least two perspectives (though in the end, they may be the same).  One is the extent to which Bell Labs research served rather more to undermine than support Bell's mission (or what Bell thought was its mission)--how, in short, Bell Labs created a world that made Ma Bell (and Bell Labs with it) impossible.  BellLabs, in short, engendered not just whole new industries but whole new industrial structures:the kind of world from which it is hard to imagine anything like a Bell Labs ever emerging again.

The other point--surely this must be related--is just how much fun it appears to have been: how much somebody (Kelly?) created or at least tolerated a world in which researchers would go about their work with sheer gusto.  My point is not that it is wrong to have fun, but rather that when you are having fun, it may be difficult to persuade yourself you are not doing what it says in the rulebook you should be doing.

What we have here, then,  is just the kind of thing a decent competition policy is supposed to prevent: managers largely exempt from the laws of the marketplace, free to do pretty well what they damn pleased with shareholders money.  It's precisely the regime that is supposed to lead to long weekends on the links at Augusta, gold doorknobs on the executive washroom doors and strategic plans directed to the pursuit of shiny objects.  Yet in a backhanded, upside down,  sort of way, it worked.   I shouldn't let myself be misunderstood here: in fact I am largely hospitable to the traditional model: managers insulated from the market do tend to morph into self-replicating bloodsuckers.  Still in spite of it all, somebody gets it right, and Bell Labs may be just one of those cases.

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