The Idea Factory: Bell Labs and the Great Age of American Innovation (50 page)

Information brings with it unintended consequences, too. Some technology journalists, notably the writer Nicholas Carr, have asked recently whether an increasing reliance on instant communications and Internet data is eroding our need, or ability, to think deeply. “What the Net seems to be doing is chipping away my capacity for concentration and contemplation,” Carr writes. “My mind now expects to take in information the way the Net distributes it: in a swiftly moving stream of particles.”
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It is the dark side, in many respects, of Kelly’s 1951 prediction, which has proven largely correct, that future networks would be “more like the biological
systems of man’s brain and nervous system.” The tiny transistor, as Kelly saw it, would reduce dimensions and power consumption “so far that we are going to get into a new economic area, particularly in switching and local transmission, and other places that we can’t even envision.”
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But we can envision it now.

The wash of information has risen so near to flood stage that Jeong Kim, the most recent president of Bell Labs, has suggested that the future of communications will be defined by an industry yet to be created—not the kind of business that simply delivers or searches out information, but one that manages the tide of information so that it doesn’t drown us. At least in the communications industry, the greatest innovative challenge on the horizon, Kim says, is “to organize information in a way that allows you to live the way you want to live, to take time off with your kids without fear you’re going to miss out on something.”
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The larger idea, then, is that electronic communication is a miraculous development, but it is also, in excess, a dehumanizing force. It proves Kelly’s belief that even as new technology solves one problem, it creates others.

To follow this line of reasoning, the contemporary iterations of Bell Labs may have to solve some of the problems created by the solutions of the old Bell Labs.

T
HE PURPOSE OF INNOVATION
is sometimes defined as new technology. But the point of innovation isn’t really technology itself. The point of innovation is what new technology can do. “Better, or cheaper, or both”—Kelly’s rule—is one way to think about this goal. In testimony before a U.S. Senate subcommittee in 1977, John Pierce gave a slightly more elaborate explanation. “The only really important thing about communication is how well it serves man,” he said. “New gadgets or new technologies are important only when they really make good new things possible or good old things cheaper or better.”
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Put another way, a new technology can put more money in our pockets, and it can allow us to do things—call across the country, send email, write software, design skyscrapers, model
pharmaceuticals—in ways that were never possible before. The results can be manifested in new products and civilizing comfort, as well as by economic growth. “The history of modernization is in essence a history of scientific and technological progress,” Wen Jiabao, the premier of China, said recently. “Scientific discovery and technological inventions have brought about new civilizations, modern industries, and the rise and fall of nations.” A recent report by the National Academy of Sciences argues that the United States, by consistently underinvesting in its education system and in scientific research over the past few decades, seems to have forgotten this lesson—a lesson that in many respects the country demonstrated for the rest of the world during the second half of the twentieth century. “While only four percent of the [U.S.] work force is composed of scientists and engineers,” the National Academy report points out, “this group disproportionately creates jobs for the other 96 percent.”
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One can only speculate about how Kelly, Pierce, Baker, and the rest would react to the most acclaimed American innovations of recent years—iPhones, say, or Google searches or Facebook. They would likely see them as vital, sophisticated tools for the information age. A more provocative question, however, is whether they would perceive them as paths to the future, as many economic commentators often do. Regrettably, the language that describes innovations often fails to distinguish between an innovative consumer product and an innovation that represents a leap in human knowledge and a new foundation (or “platform,” as it is often described) for industry. In an effort to explain his motivations, Pierce once wrote in a memo, “Things should be done only when there is the possibility of a
substantial
gain, and this must be weighed against risk.”
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The italics were Pierce’s own. Bell Labs’ substantial innovations, John Mayo, the former Labs president, points out, “account for a large fraction of the jobs in this country and around the world. And they also account for a lot of the social status of the world.”

Mayo and many of his former colleagues worry about where the foundation for the next generation’s jobs will come from. Will they emanate from America, or from abroad? Are the next great leaps in energy research
or biotechnology? Do we yet have the scientific base—akin to the “substantial gains” of transistors or lasers or optical fiber—on which to build that future economy? Or are we still living off the dividends from ideas that were nurtured, and risks that were taken, a half century ago?

E
VEN
AS M
ERVIN
K
ELLY’S LIFE
was drawing to a close, the models for innovation he had spent his career devising were changing. Kelly’s philosophy is sometimes summed up as a belief that innovation occurs by the movement of ideas in one direction: first a fundamental scientific discovery, which is then developed into a product, which is then pushed into the market. The textbook example was the transistor. In truth, he believed big scientific advances could come from any engineers or scientists encountering interesting problems. Kelly had learned that when he managed the vacuum tube shop in lower Manhattan in the 1920s. His larger view of innovation, as a result, was that a great institution with the capacity for both research and development—a place where a “critical mass” of scientists could exchange all kinds of information and consult with one another for explanations—was the most fruitful way to organize what he called “creative technology.” A corollary to his vision was that size and employee numbers were not the only crucial aspect. A large group of physicists, certainly, created a healthy flow of ideas. But Kelly believed the most valuable ideas arose when the large group of physicists bumped against other departments and disciplines, too. “It’s the interaction between fundamental science and applied science, and the interface between many disciplines, that creates new ideas,” explains Herwig Kogelnik, the laser scientist. This may indeed have been Kelly’s greatest insight.

And yet his grand design was undone by time. In his memorial tribute to Kelly, John Pierce pointed out that Kelly never had the opportunity to change his views on research and development in the wake of evolving business circumstances. As a result, Pierce concluded, “Kelly may have overestimated the amount and quality of research that could in the future be expected from industry, and perhaps from the nation.”
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Pierce
was probably correct. In succeeding decades, for instance, Bell Labs’ own journey—as it moved from its monopoly status to Lucent and Alcatel-Lucent, shucking off employees and entire departments all the while—demonstrated that a large industrial laboratory had to change with political and legal regimes. It became increasingly difficult to fund basic research; instead, Bell Labs had to focus more on development and engineering. The Labs also needed a narrower focus on products and short- or medium-term goals. The new industrial lab had to succeed not only in engineering, but in business, too.

As industrial science was evolving, a very different model for innovation arose. From the 1970s on, a host of Silicon Valley entrepreneurs proved that new ideas didn’t need to be attached to a large corporation to become world-altering technologies. A good idea could arise from a teacher or student at a school like Stanford, and the purveyor of that idea could then get funding from a venture capitalist on Sand Hill Road, the wide avenue that runs along the university’s western boundary. In turn, the idea purveyor—now simply labeled an entrepreneur—could launch his or her technology through a small start-up company in a nearby town like Palo Alto or Cupertino or Mountain View. Not incidentally, in the process of backing a winner, everyone involved could get very, very rich. Bell Labs invariably lent some of its genetic material to this process—a number of the new ideas for computers or software relied on transistors or lasers or the Unix programming language, for instance. Eugene Kleiner, moreover, a founding partner at the premier venture capital firm Kleiner Perkins, was originally hired by Bill Shockley at his ill-fated semiconductor company. But the Silicon Valley process that Kleiner helped develop was a different innovation model from Bell Labs. It was not a factory of ideas; it was a geography of ideas. It was not one concentrated and powerful machine; it was the meshing of many interlocking small parts grouped physically near enough to one another so as to make an equally powerful machine. The Valley model, in fact, was soon so productive that it became a topic of study for sociologists and business professors. They soon bestowed upon the area the title of an “innovation hub.”

Early on, Bell Labs executives were aware of the vitality of California.
At one point in the mid-1960s, for instance, Bill Baker and a New Jersey business consortium hired Frederick Terman, the Stanford engineering dean who had wooed Bill Shockley to Palo Alto in the mid-1950s. Terman is often credited as the father of Silicon Valley. (Shockley, by comparison, is sometimes called the Moses of Silicon Valley, since his failures prevented him from entering the Valley’s promised land of wealth and influence.) The hope was that Terman might be able to map out an innovation hub for New Jersey, based in part around the technological excellence of Bell Labs. One seemingly insoluble problem was that New Jersey was too geographically diffuse for the Palo Alto model to work there. The universities that did exist, such as Princeton and Rutgers, were either too far away from one another or too theoretical in their scientific focus to act as fertile training grounds for East Coast entrepreneurs. What’s more, while Bell Labs was dynamic—the scientists and engineers there shared ideas and knowledge with one another and, to a certain extent, with their friends in the academy and other industrial labs—it was not as dynamic as Silicon Valley.
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In the Valley, engineers changed jobs constantly while companies formed and dissolved and then formed again, as if in constant agitation. Terman believed a new college, perhaps modeled after Caltech and deemed “Summit University,” could help solve some of these problems. This new school—graduate students only—would provide to the region’s telecommunication and pharmaceutical companies a steady stream of expert scientific and engineering talent. The problem was the cost. It turned out that funding the school would be expensive—Terman projected a start-up cost of $15 million, according to the management historian Stephen B. Adams. The pharmaceutical industries were not interested, which meant that Bell Labs would have to be the main backer.
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It was too difficult for Baker to justify the costs. And ultimately, Summit University, along with the Terman study, was shelved.

A
T LEAST FOR THE
past few decades, the venture economy has proven a more adaptable model for innovation than Mervin Kelly’s. The products coming out of Silicon Valley—and to a lesser extent the Route 128 area
outside of Boston—have evolved fluidly, from new applications in electronic hardware, to new applications in computer software, to new applications in biotechnology and clean energy. Perhaps the only thing lacking is that venture firms are averse, understandably, to funding an entrepreneur seeking out new and fundamental knowledge. Without any way to predict the difficulty of obtaining new knowledge, and without any tools to assess its market value, how could someone bet money on it? As one venture capitalist for Kleiner Perkins puts it, “We don’t fund science experiments.” In some respects, then, this leaves a gap. While it is frequently the case that new knowledge can arise from academia or a government laboratory and then secure venture capital afterward, it seems a more difficult proposition in Silicon Valley than it was long ago in New Jersey. The value of the old Bell Labs was its patience in searching out new and fundamental ideas, and its ability to use its immense engineering staff to develop and perfect those ideas. Some of the other great and now diminished industrial labs—General Electric, RCA, IBM—followed a similar tack, though with smaller staffs and less spectacular results.

John Pierce did not flatter himself so much as to think that success in basic or applied research—those big leaps in scientific knowledge—were necessarily more heroic than development. “You see, out of fourteen people in the Bell Laboratories,” he once remarked, “only one is in the Research Department, and that’s because pursuing an idea takes, I presume, fourteen times as much effort as having it.”
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Still, Pierce understood that the big new ideas—satellites, transistors, lasers, optical fibers, cellular telephony—could create an entirely new industry. “You may find a lot of controversy over how Bell Labs managed people,” John Mayo, the former Bell Labs president, says. “But keep in mind, I don’t think those managers saw it that way. They saw it as: How do you manage ideas? And that’s very different from managing people. So if you hear something negative about how John Pierce managed people, I’d say, well, that’s not surprising. Pierce wasn’t about managing people. Pierce was about managing ideas. And you cannot manage ideas and manage people the same way. It just doesn’t work. So if somebody tells you Pierce wasn’t a great manager … you say, of what?”

Mayo and other Bell Labs veterans don’t always call people like Pierce or Baker the Young Turks, the name this group of men, long ago, gave themselves. Sometimes they call them, without irony, the Giants. “Pierce did not let people get in the way of his pursuit of ideas,” Mayo adds. “He did not compromise because it would make people feel good. He did his thing because he felt it was necessary to accomplish the development of ideas the way he wanted. He was excellent at that. And I loved those research people for that. They weren’t about making people feel good. They were about motivating people—not to do the conventional thing, but to do the unconventional thing.” To follow the progress of business now, Mayo adds, is to become accustomed to watching successful technology companies offer new engineers rich incentives for their work. Pierce and Bell Labs couldn’t do that because they were funded like a public utility. But they also couldn’t do that because it chafed against their belief in how innovations arise. “Incentives are fine,” Mayo says, “but they produce incremental improvements in what’s there. That’s not what Pierce was about.”