As we’ve discovered, there are always many unseen factors that drive the creation of demand. But the single greatest factor is the kind of scientific discovery that leads to the development of new industries, simultaneously creating demand for new products and the high-income jobs to pay for them. From television to compact discs, calculators to cell phones, computers to the Internet, Shockley’s little baby has now spawned untold offspring, creating thousands of companies, tens of millions of jobs in virtually every country on earth, and trillions of dollars’ worth of demand.
Today, more than sixty years later, the fourth- and fifth-generation offspring of Shockley’s baby are continuing to stimulate new forms of demand around the world, producing benefits the Bell Labs pioneers could never have envisioned.
In the introduction, we described the Nokia 1100, the world’s bestselling consumer electronics device. It’s a cheap, rugged, versatile cell phone that is transforming life for tens of millions of rural people in India, nearly half of whom now have access to mobile telephony. In the process, cell phone service itself is being reinvented, enhanced by functions for addressing many of the most pressing problems facing the Indian farmer. Cell phones like the Nokia 1100 are becoming multifaceted business tools for rural Indians, providing dozens of ways for them to overcome the hassles of doing business in the developing world and improve their chances of escaping poverty.
The impact on an Indian farmer can be remarkable, as a January 2009 study by agricultural researchers revealed. One farmer surveyed, identified only as Mr. Jagdish, raises gwar, a grain used as livestock fodder, in a village in Rajasthan near the Pakistani border. Jagdish attributes a 25 percent increase in his annual earnings to the cultivation practices he learned from his IKSL cell phone feed. A group of flower cultivators in Maharashtra in central India has begun using daily market reports to adjust the quantity of perishable blooms they transport to town, thereby reducing waste and maximizing the value of their crops.
Besides having created the quintessential cell phones for the developing world—sturdy, simple, inexpensive wedges of plastic with a hundred well-designed functions—Nokia is vigorously supporting the development of information services like these, thereby expanding the usefulness of its phones for rural customers.
Nokia Life Tools, for example, includes an array of applications designed to appeal to people in the developing world. Created in collaboration with Reuters, it offers services like weather reports, market prices for various commodities and agricultural inputs (like seeds, fertilizers, and pesticides), English-language lessons, test-prep programs for students, and even selective entertainment functions such as horoscopes, cricket scores, and ring tone downloads.
Mail on Ovi is another Nokia breakthrough. It’s an e-mail application based on Ovi, Nokia’s broad-based Web-services portal (the company’s answer to Apple’s iTunes Store). Mail on Ovi lets users of Internet-enabled cell phones like the Nokia Classic 2323 set up and use an e-mail account without access to a computer. And while the 2323, currently priced at around $50, may be a trifle pricey for the typical Indian farmer, it fits nicely into the multiple-owner cell phone model that many in the developing world practice.
Nokia is also investing in Obopay, a mobile-phone cash-transfer system that lets mobile phone users access bank accounts, pay bills, borrow money, and repay loans electronically. Based in Redwood City, California, Obopay operates in India and uses cell phone software or text-messaging programs to transfer funds from one account to another, collecting a small usage fee for each transaction.
Meanwhile, Nokia continues to innovate around the phone itself. One methodology has been the creation of what the company calls Open Studios in shantytowns in Mumbai (India), Rio de Janeiro (Brazil), and Accra (Ghana), where users are invited to work with Nokia designers to create their own concepts for the ideal mobile phone. More than two hundred local residents have produced unique phone designs, proposing new features that include a sensor to test water quality and a screen that flashes the word “Peace” as a way of defusing conflicts.
The information revolution in Indian farming has led to a whole new layer of demand whose origins can be traced back to Shockley’s invention. Demand for cell phones, of course—but also demand for cars, schooling, better houses, improved diets, and all the other benefits of middle-class life that India’s newly empowered farmers are increasingly able to afford.
The question for today—more than sixty years after Shockley’s breakthrough—is this: What institutions in contemporary society are fostering the culture of discovery that will lead to the next transistor?
NOT SO LONG AGO, the core skill of the United States was new industry creation. And at the same time—not coincidentally—the country boasted the world’s largest and fastest-growing economy. During the 1920s, 1930s, 1940s, 1950s, and 1960s, scientific and technological breakthroughs from the United States produced a steady stream of extraordinary new industries and products. These industries stimulated consumer demand and, by providing high-paying jobs, enabled it.
That stream of basic discoveries was produced not mainly by self-funded geniuses in backyard garages but rather by a quite unusual and focused machine for discovery and innovation—a network of institutions deliberately founded, organized, and run for the purpose of fueling scientific and technological insight. Including such legendary institutions as Bell Labs, Xerox PARC, RCA Laboratories, DARPA, and others, this network consisted of public, private, nonprofit, and for-profit efforts working in combination. Programs with clear commercial potential were supported alongside efforts at “pure science,” with the two streams resonating with and feeding off each other. This discovery and innovation machine existed because of a business and political culture that supported invention independent of immediate practical applications, as being “good for the country.”
The contributions these institutions made to science, technology, and the economy—including the creation of millions of high-paying jobs and entire industries—are both enormous and difficult to quantify.
Consider Bell Labs, for example. Founded in New York City in 1925 under the leadership of research director Frank B. Jewett as a joint venture of American Telephone & Telegraph and Western Electric to develop equipment for the Bell System telephone companies, the labs grew to include facilities in New Jersey, the Chicago area, and several other locations. Supporting both pure scientific research and technological developments with immediate applications to telecommunications, Bell Labs spawned or supported a startling number of scientific breakthroughs that played pivotal roles in the history of twentieth-century technology and that created entire new industries with millions of high-paying jobs. The invention of the transistor by Shockley, Bardeen, and Brattain is only the most dramatic and important example. Some others:
The first public demonstration of fax transmission (1925)
Invention of the first synchronous-sound movie system (1926)
First transmission of stereo signals (1933)
First electronic speech synthesizer (1937)
Research underpinning the development of the photovoltaic cell (1941)
First description of the laser (1958)
Development of metal oxide semiconductor field-effect transistor, basis for the large-scale integrated circuits that make modern IT possible (1960)
Creation of the UNIX operating system (1969)
Development of cellular network technology for cellular telephony (late 1960s to 1971)
Creation of C programming language (1973)
Seven Nobel Prizes in physics were awarded for work completed at Bell Labs. And the number of companies and entire industries built on the foundations laid at Bell Labs is almost incalculable.
However, over the last two decades, funding and staffing of Bell Labs has been drastically reduced. The number of researchers has fallen from 3,400 to fewer than 1,000. And in August 2008, its parent company, Alcatel-Lucent, announced it would be pulling out of some of its last remaini
ng areas of basic science—material physics and semiconductor research—to focus on projects that promise more immediate payoffs.
Financial pressures made this decision inevitable. But it cost our economic system a unique asset whose value is literally incalculable, since pure scientific research often has long-term benefits that are impossible to predict.
Here’s one example. In 1948, Bell Labs scientist Claude Shannon, who is widely acknowledged today as the founder of modern information theory, published his paper “A Mathematical Theory of Communication” in the Bell System Technical Journal. At the time, it was a piece of “pure science,” with no obvious or immediate practical payoff. But years later, physicists applying Shannon’s ideas to the mathematics of data transmission discovered ways of sending digital information at ultrafast speeds over copper wires, making DSL connections possible. Today those connections bring high-speed Internet service into 160 million homes.
Thus the downsizing of Bell Labs isn’t simply a loss for scientists interested in knowledge for its own sake. It eliminates one powerful mechanism for pursuing new concepts whose potential practical benefit we will never know.
In similar fashion, the other great U.S. research institutions of the twentieth century, such as RCA, DARPA, and PARC, have also been downsized and redirected.
Formed in 1935 and based since 1942 in Princeton, New Jersey, RCA Labs (formally known as the David Sarnoff Research Center) was even more focused on wireless communication than Bell Labs. RCA Labs helped to perfect the science of black-and-white TV and laid the technical foundations for both the color television broadcast network and its system components. This new industry generated enormous demand and millions of jobs in programming, advertising, manufacturing, and TV station operation. RCA Labs went on to make discoveries that enabled space communication, satellites, disc recording, low-power MOSFET and CMOS technology, liquid crystal displays, and a host of other breakthroughs.
RCA Labs differed from its rivals in one fundamental way. Its growth was driven by David Sarnoff, a tough-minded leader who played enormous roles in the creation of a series of major twentieth-century industries. Way back in November 1916, a twenty-five-year-old Sarnoff had proposed to his boss, E. J. Nally of the Marconi Wireless Telegraph Company Ltd., that radio broadcasting of music, news, and sports would one day entertain and inform millions, and urged that Marconi quickly get into the business of manufacturing “radio music boxes.” When Marconi rejected the idea, Sarnoff convinced General Electric to fund the development of a prototype through its investment in RCA. In 1921, he helped arrange for the live broadcast of the Dempsey-Carpentier heavyweight championship fight, which drew hundreds of thousands of listeners. It was an early indication that radio would soon become a powerful force in sports and entertainment, a trend that helped propel Sarnoff to the presidency of RCA in 1923.
Sarnoff deeply believed in the long-term value of basic science, even when developed by a single company. Sarnoff bid for government contracts to defray costs and pursued patenting and licensing deals aggressively. This combination of moves generated powerful revenue streams that helped cover the direct costs of the basic science work, and the huge industry wins in the manufacturing of TV components and other products were all upside. (We wonder what the returns might have been if this business model of for-profit basic research had been applied at Bell Labs or at Xerox PARC.)
Sarnoff long retained his visionary grasp of the power of technology. In the mid-fifties he predicted that biotechnology, aquaculture, and computers would eventually transform the world. In the mid-1970s, even after Sarnoff’s retirement in 1970, RCA Labs proudly announced it was generating as many patents as the larger Bell Labs. But a gradual decline had already begun. In 1986 RCA was sold to GE, which donated RCA Labs to SRI International.
The Defense Advanced Research Projects Agency (DARPA) was originally launched in 1958 as a response to the Soviet launch of Sputnik, the first artificial satellite. DARPA’s focus was primarily on projects that could meet the demands of the military sector, but those demands were defined as broadly as possible—fortunately for the nation and the world.
Under the leadership of J. C. R. Licklider, the first director of IT research at DARPA, the agency (either directly or through programs it funded and promoted) helped launch an amazing array of information technologies we now take for granted, including such breakthrough inventions as time-sharing, computer graphics, microprocessors, very large-scale integration (VLSI) design, RISC processing, parallel computing, and local area networks.
Countless commercial applications can be traced directly to DARPA projects. A small example: The Sun Microsystems workstation would not have existed except for half a dozen major technologies developed at universities and companies that were funded and supervised by DARPA. And a huge example: DARPA’s interagency information-sharing network laid the foundation for the Internet, which exploded into a full-blown industry around 1995—the last major new industry created in the United States, now a full decade and a half ago.
Today, DARPA’s focus and methods have changed dramatically. Partly in response to the trauma of 9/11, DARPA has shifted its emphasis from broad-based scientific inquiry to projects with short-term military applications. Funding has been moved from universities to military contractors; publicly available research designed to spur further advances by others in the field has given way to classified programs conducted in secrecy.
PARC, Xerox’s Palo Alto Research Center—the original gestation place for the technology that ultimately gave rise to E Ink, the Kindle, and a growing array of related products—offers another, somewhat different example of the challenges now facing America’s discovery and innovation machine.
In the 1970s, PARC thrived thanks to generous funding by its corporate founder and sponsor, as well as a hands-off philosophy that encouraged independent, farsighted work regardless of immediate applications. Note that PARC was established in 1970 some three thousand miles away from Xerox’s headquarters in Connecticut—a move that both symbolically and practically emphasized its freedom to establish its own direction.
In its heyday, PARC employed some 280 researchers. It was a powerful magnet for many of the most brilliant and creative minds in its fields. And as at Bell Labs, the discoveries and breakthroughs made at PARC fed on one another, creating a uniquely valuable upward spiral of creativity and innovation. Fueled by the extraordinary talent that had grown up doing DARPA projects in the 1960s, PARC produced perhaps the greatest set of discoveries in the shortest time of any innovation engine in history: the graphical user interface, the personal computer, the Ethernet, WYSIWYG (what-you-see-is-what-you-get) design software, laser printing, and many others.
Ultimately, through the midwifery of Steve Jobs, Bill Gates, and the Silicon Valley venture capital community, these discoveries produced a multidimensional demand explosion even greater than that of the color TV. And they simultaneously produced a high-income explosion (in the millions of high-paying jobs) that helped pay for the demand unleashed by the PC revolution.
Today, the number of researchers at PARC is about 165. The focused profile and business goals of today’s PARC typify the fate of America’s once-enormous, well-funded research institutions. Although smaller versions of the great industrial labs continue to operate, the gigantic research infrastructure filled with freewheeling, visionary scientists has been dramatically reduced.
THE DECLINE OF the twentieth-century discovery engines forces the question: Who is going to produce the scientific breakthroughs that will create the new industries on which tomorrow’s demand will be based?
The hopeful news: The creative spark once embodied in places like Bell Labs still burns—on a smaller scale, but as intensely as ever—at a handful of institutions that are pioneering new approaches to scientific discovery and technological innovation.
The first is a twenty-first-century microcosm of Bell Labs—a corporate-sponsored research institution that is focused not on pr
ojects with obvious commercial viability and short-term payoff but on open-ended exploration of diverse technological challenges.
One of its proudest creations: ASIMO, a humanoid robot that boasts an amazing array of capabilities. ASIMO, whose name refers not to Isaac Asimov (the science fiction writer whose “Three Laws of Robotics” have inspired generations of futurists) but rather stands for Advanced Step in Innovative Mobility, can walk, turn, stop, and climb stairs; push a cart or carry a tray; switch on a light or open a door; and detect moving objects and avoid obstacles. ASIMO can even recognize facial expressions and obey spoken commands. First unveiled in 2002, and still the world’s most advanced humanoid robot, ASIMO has become an international traveler and celebrity, seen on the slopes in Switzerland, riding in the Rose Bowl parade, and hobnobbing with Hollywood royalty at Sundance.
You might think that ASIMO is the natural product of playful PhDs in some Silicon Valley start-up. But ASIMO was invented by the Honda Research Institute (HRI), a division of the automaker with facilities in the United States, Japan, and Europe. Why would a car company be involved in such a project? And what does this have to do with demand?
As for the first question: We think of Honda as a car company, but it’s always been an engine company, producing engines for everything from lawn mowers to ultralight jets. Honda’s past has been largely shaped by the century-old motorcycle and automobile industries, but its future (like everyone’s) has yet to be shaped. That helps to explain how Honda got into the robot business—as a way to explore some of the emerging technologies that may foster the next great industry through which Honda hopes to create large-scale new demand.
Driven in part by Honda’s intense interest in mobility, the company’s engineers set out in 1986 to create a walking robot that could duplicate the complexities of human motion. They went to zoos to study how animals walked; they observed the structure and function of beetle legs, and compared them to the joints in human limbs.
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