As ALU Circles the Drain, the Real Loss Was Bell Labs

As the US moves on from the dreadful mudslinging that characterized the 2012 Presidential election, many Americans are wondering what the US government can do to restore the nation’s leadership in the world. There’s an awful lot of unrealistic rhetoric harkening back to “the good old days” when things were built in America and the nation was on the rise. What’s rarely discussed, however, is that the US is losing its leadership position, at least in part, because the US government no longer invests in invention as it once did. Science-driven national priorities like the Apollo program, which spun off hundreds of beneficial technologies, are essentially extinct. And the birthplace of thousands of inventions, Bell Labs, was absorbed into post-divestiture Lucent, sold off to French equipment maker Alcatel, and is now circling the financial drain. The loss of Bell Labs is a shameful tragedy not only for the United States, but the world. It calls into question attitudes that value innovation over invention and short term profitability over long term economic and scientific advancement.

Bell Labs’ Inventions
The Bell Labs model, put simply, was to find the smartest people out there, put them in laboratories together, and ask them to invent stuff. And that they did. Six Nobel Prizes later, Bell Labs can take credit for a few trinkets we might value today: The fax machine. The laser. Movies with synchronized sound. Long distance TV transmission. The transistor. The LED. Direct dialed long distance calls. Solar battery cells. Transatlantic phone and later fiber optic cables. Proof of the Big Bang. Unix, which made the Internet possible. Digital signal processing. Digital cellphones. Digital radio. Wireless Internet. VoIP switching. 100 GB IP transmission. This is just a short list of the highlights of things that were invented at Bell Labs.

But, Bell Labs has its detractors as well. Forbes’ Michael Kanellos wrote this article earlier this year which cites Intel CEO Paul Otellini patting his company on the back for inventing, innovating, and bringing technologies to market (perhaps rightfully so). To do so, he unfortunately felt the need to criticize Bell Labs for being strong on invention and weak on marketing. It’s that kind of attitude that wants to kiss up to Wall Street by “innovating,” for example, the Malibu Barbie of mobile devices – the iPad mini, for short term gains, rather than taking risks and investing big dollars in true inventions that spawn the birth of industries and the advancement of human civilization.

I’ve been fortunate to have multiple colleagues and relatives who worked at Bell Labs. They all speak glowingly of the atmosphere of invention; the family attitude; and the extreme professionalism and collegiality of the place. People who worked inside Bell Labs also made contributions in places like Fermi Lab, Kendall Square Research, Jet Propulsion Laboratories, Xerox, and other great centers of invention. These masters of the sliderule with coke bottle glasses gathered to change the world and succeeded because they didn’t have bean counters and bonus-hungry MBAs micro-managing their every move.

The Demise of Alcatel Lucent
Today we hear about ALU eliminating another 10,000 employees in order to become more cost efficient. Financial analysts say the company must reduce its sales and administrative expenses by 5 percent or more to keep up with rivals like Ericsson, Nokia Siemens, and Huawei. And frankly, we can’t fault CEO Ben Verwaayen for doing it; his performance is measured on profitability, not on invention or innovation. Regardless, ALU maintains a €2.5 billion (about US$3.2 billion) R&D budget and is credited with driving invention and innovation in areas like wireless antennas, fiber optics, routers, and LTE technology. Consider, however, that US$3.2 billion is a spit in the ocean compared to the US$100 billion (in 2012 dollars) the US government invested in the Apollo program.

As ALU tries to innovate and invent across the board, analysts say that what’s hurting the company is having too broad a product portfolio to achieve the kinds of economies of scale that more pure-play oriented companies achieve. So, let’s go back to what Otellini was saying. Intel is a pure play. It makes processors. It does it well and efficiently. The company has been behind the eight ball a bit on the mobile revolution, but it continues to pay handsome dividends to its shareholders and still dominates its core markets by an enormous margin. The beauty of a place like Bell Labs, though, is that it invented and discovered things it never even intended – like proof of the Big Bang – because it was free to pursue paths of invention even, and especially, as they meandered into uncharted areas.

Invention is Even More Important than Innovation
The pure science at the heart of true invention is too often incompatible with bean counting approaches to business. When we pull the plug on pure science to make Wall Street – or worse, lobbyists and budget hawks – happy, we lose the inventions that give rise to massive economic windfalls and technological revolutions. Instead of the next laser, we get Facebook. In the place of the next transistor, we get Spotify. Without Bell Labs, the entire mobile revolution we are witnessing today, and its massive profits, probably never happens. We laud companies like Apple for finding cool new ways to combine things that someone else invented. And while there’s a place and a need for that kind of innovation, it is not the same thing as invention and ultimately it is not as valuable to the global economy.

So as we watch ALU decline we must remember that along the way we are likely to lose whatever shadow remains of what was Bell Labs. And that is not only a terrible shame, it is an example of how the United States has dismantled its greatest assets, undermined its own prosperity, and lost its leadership role in the world. All of this comes in the name of financial statements that fail to measure the real contributions that national investments in brilliant science have made to everyone’s bottom line.


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About Edward Finegold 122 Articles
Ed is now Director, Strategy for NetCracker. Previously, for 15 years he was a reporter, analyst and consultant focused on the OSS/BSS industry and a regular contributor to BillingViews.

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