Bell Labs as a Pioneer of Culture and Practices that Made Knowledge Workers Productive

A number of elements were needed to create the information economy. Perhaps unsurprisingly, much of what was needed emerged at the company responsible for America's communication: AT&T. Bell Labs did not just develop amazing technology like transistors, fiber optics, lasers and cellular telephones. They developed the practices that made knowledge workers productive.

Three of those practices were a reliance on
1. research rather than just tinkering,
2. creating a community of minds, and
3. crossing boundaries between the private and public sector.

research rather than just tinkering
Thomas Edison tinkered. It took him about 3,000 experiments before he figured out the light bulb. He gained knowledge through trial and error.

No one has the time and money it would take to develop fiber optics, transistors, or satellites with trial and error. To develop products that much more sophisticated than a lightbulb required basic research, gaining an understanding of theory. Bell Labs had folks focused on basic research, on gaining understanding of deeper principles that would enable technologies like fiber optics that could carry thousands of conversations along the same strand or satellites that could seemingly defy gravity while collecting and transmitting information across continents at the speed of light.

Because it was a place where people could perform basic research, nine Nobel Prizes were awarded for work at Bell Labs. The ripple effect of this basic research has still not been fully felt. Three of those Nobel Prizes were awarded for the development of the transistor and one of those prize winners went on to found the first in a series of companies that would lay the foundation for Silicon Valley. It is true that a lot of basic research will never payoff; it is also true that it is impossible to fully calculate the value of successful basic research. Early in the 1900s, William James was explaining pragmatism as assessing the cash value of holding an idea. An idea like transistors and all that it enabled has a value in the trillions and counting.

creating a community of minds
Bell Labs was a community.

It was a creative environment that fostered a rich exchange of ideas, something the science writer Steven Johnson has observed is more important in eliciting important new insights than market forces. The projects at Bell Labs required teams. Those teams required a community. The problems they were solving and possibilities they were pursuing were far beyond the capabilities of any one person.

crossing boundaries between the private and public sector
One of the many reasons that the information economy is a global economy is because ideas show as little respect for borders as clouds or pandemics. Translating ideas into value doesn’t come from rigid barriers between nations or institutions. It comes from a flow of ideas and practices across such lines.

A 2008 study titled "Where do Innovations Come From?" concluded that partnerships between corporations, government laboratories, and university researchers has become essential to innovation. In 2006, for example, 77 of 88 US entities that produced significant innovations had received federal funding.

Bell Labs received government funding in a couple of ways. The first was that the government granted it monopoly status to run the nation’s phone system. This guaranteed steady revenues to fund long-term research. The second was that Bell Labs received billions from the federal government. In World War 2 alone, Bell Labs received thousands of contracts. It was the beneficiary of the funding for these projects and of course the beneficiary of the intellectual capital generated by these projects.

The central question of the information economy was how to make more knowledge workers and make them more productive. Bell Labs gave us some great answers to the question of how to make them more productive. Their technology made the flow of information – and thus ideas – easier, which made knowledge workers more productive. As befits a company responsible for creating and maintaining the phone system that connected an entire nation, it also pioneered a culture and practices for corporate America that encouraged cooperation and a free flow of ideas.

Given the complexity of the problems in the 20th century, any successful effort would find a way to encourage collaboration among lots of really smart and informed people. Because one of the many truths to emerge out of the 20th century is that all of us are smarter when all of us are smarter. As we connect and share ideas, your insights become mine and mine become yours. Often, this inspires yet another insight or idea. If I give you a dollar and you give me a dollar, we walk away no better off. If you give me an idea and I give you an idea, we both walk away better. Technology and culture that encourages communication and collaboration – even across traditional boundaries of private and public sector - is key to making knowledge workers more productive.

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Much of the above information about Bell Labs came from Jon Gertner's The Idea Factory: Bell Labs and the Great Age of American Innovation.

Some Policies my Ideal 2020 Candidate Would Pursue

My ideal candidate would take the following positions on these issues.

Economics

• Make it easy for entrepreneurs to succeed.
• incubators in communities the way earlier generations planted libraries and universities as just one of the many support structures to put in place to make more citizens more entrepreneurial. Do all we can to make citizens wildly successful and then tax the ones who achieve success at high rates (say, marginal tax rates double that of middle class) to pay for investing in the next round of new entrepreneurs.
• Make a huge investment in research

• We will spend about $3.5 billion on DARPA - Defense Advanced Research Projects Agency - this year. DARPA has helped to fund amazing technologies that helped birth modern computers, smart phones and satellites. We are still counting the trillions in returns on early investments of millions and billions in DARPA. I would match the DoD's R-and-D spending with similar levels of spending on Department of Education, Department of Energy, etc. to something like the table above. This would not only employ a growing number of doctoral graduates (we could conservatively assume about 140,000 new jobs for staff and leading researchers with the numbers above) but would lead to returns of trillions in the future as we solve problems of energy, commute times, poverty, environment, etc. Entrepreneurs can translate this research into development, creating new wealth and jobs in the process of deploying new processes, services and products that build on this research.
• Make it easy for employees to use corporations as tools for creating wealth
• Laws requiring mechanisms inside of corporations that allow employees to create wealth through innovation and entrepreneurship and dictating that between 0.5% to 2% of that corporation's employees are paid more than the CEO as a result.
• Tax inheritance more than capital gains more than income
• Massive spending on research on alternative energy, upgrading infrastructure to reduce carbon emissions and the introduction of carbon tax. Innovate our way out of a fossil fuel economy.

Social policy

• Make it easy for single moms to succeed
• Make high-quality childcare free
• Sex is one of the most wonderful acts and rape is one of the worst. The main difference is consent. Pregnancy and childbirth is one of the most wonderful acts ... unless it is forced on you by others, in which case it is one of the worst. It should be the choice of individual women about whether and when to have sex or babies, not the choice of the men in their community. 
• Annually - and aggressively - reduce childhood poverty
• Provide universal healthcare
• This would include death panels and other criteria about what level of care we have a right to and what level of care the community should not be billed for.
• Transform K-16 into an education system that creates a common sense of community but a wildly diverse workforce that includes the knowledge workers that are the primary focus of schools today AND trades, entrepreneurs, makers, government and service workers and other emerging career paths

Communications

• Treat investigative reporting like research. That is, it should be funded by the government with oversight of the agenda by citizen boards. (We should more aggressively follow the example of the BBC.)
• People whose data is key to the success of a social platform (e.g., Facebook, Twitter, etc.) should receive a portion of that platform's revenue (idea taken from Andrew Yang).

Growing Income Inequality and the Real Policy Solution of Popularizing Entrepreneurship

The effects of automation are accelerating as algorithms grow more sophisticated and a global market means more people who might come up with that one killer app or manufacturing process or delivery trick that quickly obsoletes 2 or 3 people or even 2 or 3 industries steadily grows by millions every month.

How does one counter that? Income vulnerability seems inevitable in a world of growing disruption. The good news is that the team who creates the new solution to obsolete the old one(s) will get rich; the bad news is that there is a whole swath of people will lose income and wealth as they become obsolete. If we want to ride this wild horse of automation to higher productivity, we need to acknowledge that our safety nets need to be good. How this happens will ultimately involve a mix of unemployment insurance, universal healthcare, affordable or free education and retraining for any age, and perhaps a variant of guaranteed income. But those are mere bandages on the body politic, merely a way to mitigate the pain of disruption. The solution that is essential to couple with more rapid automation is more rapid entrepreneurship and innovation.

When we no longer need 90% of our people to grow our food on the farm, we can use them for other things. Some can get into food preparation and serving, letting us enjoy a wider variety of foods that people in 1790 America (when 90% of the population was in agriculture) would have never imagined: foods like sushi, adoboda tacos, spaghetti, and liquid nitrogen ice cream. Others can design and make cars, legos, barbie dolls, and new drugs. If there is nothing else to do but grow food, reducing the percentage of our workforce needed to grow food from 90% to 1% (which is roughly where it is today) is a catastrophe. 1% of the population would be incredibly rich and the other 99% would literally need credit just to buy food. But we innovate and those 99% come back with cool stuff that entices the farmer to give up his food. (Or, more precisely, he sells his crop for money he can use for the cool stuff.)

The problem with wealth and income inequality today is not that people are getting rich automating jobs. The problem is that we have not learned how to balance that rate of automation with an equal or even better rate of innovation and entrepreneurship.  What this means will involve everything from even more money poured into R and D to more funding even within Fortune 500 companies for entrepreneurial efforts that simultaneously allow employees and the company to create new wealth.

As mentioned, programs to mitigate income and wealth inequality seem both necessary and inevitable. But to stop there is not enough. The real question of economic progress should be: how do we create the new so rapidly that it feels like the old industries are not automating jobs fast enough to free up workers to enter the new industries and companies? 

Economics makes a big deal of supply and demand and equilibrium between them. It's a beautiful and powerful concept. But just as important to prosperity is understanding the balance between automation and innovation, destroying the old while creating the new. What is the solution for automation obsoleting jobs? Popularizing entrepreneurship: making it easier for more people to be more entrepreneurial and even changing the definition of work as much as the information economy has or the industrial economy before that.

The Odd Collusion of the Rich and Poor to Block Progress for Security

There is a curious collusion between elites and the working class that can actually arrest progress and stop wage growth. 

You wouldn't think that the working class - people in the lower middle part of the income distribution - would willing collude with the wealthy to perpetuate what might strike others as a fairly basic income. And yet ...

There are a few concepts that come into play in this attempted explanation: extractive institutions, insecurity, and gales of creative destruction. 

Schumpeter immortalized the term, "gales of creative destruction" as a means to define how markets simultaneously create the new - "look! a horseless carriage!" -  and destroy the old - "look! Clem's closed up his horse dependent carriage shop!" By most every measure, these gales of creative destruction are the source of progress but they also threaten the folks who are currently making a perfectly good living selling the old, soon to be obsoleted product. 

When you are working class, you're not in poverty but you are not secure. Over half of Americans don't have enough savings to cover an unexpected expense of $500. For these Americans losing a job and then getting retraining for a new career are simply not a practical choice. (It might be a necessary one but it's not a practical one.)

Finally, there are extractive institutions (I first encountered this concept in Acemoglu and Robinson's book Why Nations Fail) that leave workers within them at a subsistence wage. The owners or rulers of these institutions - whether the Spaniards who ruled the encomiendas or Robert Mugabe over Zimbabwe - extract all the profit from the institutions. Among the many problems with extractive institutions is this: no one has incentive to conjure up the gales of creative destruction to create the next, best thing. Any breakthroughs in process that workers could adopt to raise profits will just flow to the pockets of the owners. People within the system won't make any more whether they work harder to smarter so they tend not to. People who control the institution aren't really interested in any progress that could create the gales of creative destruction that suddenly obsolete their system so they tend to resist progress or improvement. There is a huge difference between the poor people within the system and the rich who rule it but they do share this: they feel threatened by change and will resist it.

Progress steadily makes life better for everyone. It also tends to abruptly make life worse for at least a few: the unfortunate stockholders in Kodak when Instagram comes along, or worse, their unfortunate employees.

Politically, this is tough. The folks who lost their jobs to automation or outsourcing are acutely aware of this. The folks who are buying 1" extra of TV for 90% less are less aware of this and less passionate about it. Progress's creative gales are more evenly - and imperceptibly - spread across a population than are its destructive gales.

An aversion to change that might bring in the gales of creative destruction is shared between the insecure working class and the owners of extractive institutions who profit from the status quo. They make for odd bedfellows but both share an incentive to resist free trade and new technologies. 

Using Charter Schools as Tools for Progress by Letting Them Patent New Approaches

Pedro Noguera writes a great piece in The Nation about charter schools titled, "Why Don't We Have Real Data on Charter Schools? Charters were supposed to be laboratories for innovation. Instead, they are stunningly opaque." 

He makes a variety of important points but one statistic he mentions almost in passing is to me the defining one: 

"According to a 2013 study by the Center for Research on Educational Outcomes at Stanford University, only 29 percent of charter schools outperformed public schools with similar students in math, while 31 percent performed worse. Most charter schools, in fact, obtained results that were no better than traditional public schools."

Let's round this instead of using 29% or 31%. Essentially, what this Stanford study revealed is that 33% - one-third - of charter schools did better than public schools, one-third did worse and one-third did the same. Depending on just how you measure it, this exact same claim could be made of public schools themselves: about a third are noticeably better than average, about a third are worse and about a third are average - give or take. In other words, charters schools - on average - are no better and no different than public schools. 

Noguera reminds us that charter schools were supposed to be a way for specific schools to be free of traditional regulations in order to allow experimentation. What they have become instead is a means to compete with public schools without real transparency or accountability. 

I have an idea for making education more innovative, for giving incentive to every teacher and educational entrepreneur to make education better. Let organizations and individuals patent new ideas. Let them get a monopoly profit on the good idea of - say - using business startups in high school as a means to fund extracurricular activities for kids while teaching them about business, marketing, product development, using art for ads, math for balance sheets and profit and loss, etc. You might patent this as an organization ("The Wanna-be Jobs School of Business") or as an individual inside of  a public school. If other schools adopt your curriculum, they pay you. And for 7 years you might make millions on the spread of your idea. After that, your patent expires and every school anywhere can use the materials or approach for free. Education gets better and there is money available to incentive people to develop new materials, methods, and philosophies. 

As it now stands, there is no incentive for any charter school to share anything that would actually make other schools better. That would simply mean giving away their competitive advantage, which is nuts. Instead, give them incentive to develop approaches that would benefit everyone.

In the 1620s, Edward Coke (pronounced Cook) led the creation of patent law, essentially granting monopoly rights for a short-period before making knowledge of new technology public. This gave people incentive to invest time and money into inventions that previously only gentlemen of leisure might dabble with. By 1699, England had its first steam engine and during the next century the Industrial Revolution was underway. 

If the US is serious about promoting education, maybe the right model isn't letting private schools compete by using methods that appear to be - on average - no different from those of the average public school. Maybe the right model is letting any individual or organization patent educational approaches that every school would find enticing to adopt.

The Price of Loyalty to the Tribe

Imagine generations ago, a member of a tribe realized that praying to the god of irrigation didn't make any difference but actually digging trenches from the nearby river did. He even worked out when the trenches should be dug and when they should be closed off, who would do the work, and how much this predictable irrigation would increase crop yields. This benefit would of course make the tribe healthier, support more children so the tribe became larger, and make this irrigation pioneer one of the great men in the tribe.

But of course his great insight was just as likely - perhaps more likely - to have left him alone on the plains, ostracized from the tribe for questioning the beliefs that held the tribe together.

Innovations might make life better but being in the tribe makes life possible.

It's kind of a miracle that anyone has the courage to speak out. Because being right is a consolation prize when you're standing out on the plains, facing the lion alone.