The Frightful Five

Economist Farhad Manjoo’s NYT column yesterday discusses public and private funding basic scientific research, a subject about which research universities and all US citizens should genuinely be concerned. Congress now funds basic research through annual R&D appropriations of $140 billion to grant agencies who distribute research grants in response to proposals for basic research. Under Bayh-Dole (B-D), promising discoveries may be patented, then commercialized through public-private partnerships that require fulfilling specific societal obligations. Research universities are appropriately concerned about the continued viability of today’s R&D funding dynamic. At a time when funding increases are needed, Trump has proposed R&D budget cuts and unfunded tax reform. And, to make matters more perilous, deficit-hawk budget concerns combine to jeopardize such funding.

Manjoo references the 60 billion annual expenditures of our five largest corporations commonly referred to as the “Frightful Five” (FF) — Alphabet, (Google) Amazon, Apple, Facebook, and Microsoft. Highlighting Google’s efforts “to inject machine intelligence into much of the global economy” he notes that total FF non-defense spending on AI and other basic science is exceeded by annual congressional spending on non-defense basic science research by a mere $9 billion! Add in other privately conducted research and the private sector is outspending the public sector on basic research. Manjoo’s article is non-judgmental. He even references to the joint op-ed by Google’s Erik Schmidt and MIT’s President Eric Lander urging more R&D spending (see my article here). But curiosity-riven basic research is non-investable but imperative to technological and biomedical progress. Corporate basic research is a very different animal.

Nevertheless, a likely take away by deficit hawks from the Manjoo article is that since funding basic science research is so prevalent in the private sector, why not move all of its there? He wonders what would happen if we eliminated our government’s investment in non-defense basic science relying exclusively on the private sector. He leaves the question unanswered but effectively asks why the government should pay for it if both are taking it in the same direction? We will surely hear this argument again. By themselves, the FF expenditures alone almost equalize it. Could our annual federal non-defense spending of $69 Billion be put to better use? The simple answer is a resounding “no.” Increased federal spending is crucial if research that does not offer an adequate return because of its nature (like antibiotics ) or doubtful patent durability (resulting from uncertainty). Research universities can not let such an elimination happen.

Read on to see what we know that Manjoo doesn’t.

Basic research and private sector research may at times address the same subjects, but their investment purposes are different. Various schemes to otherwise incentivize beneficial social research such as prizes, or to control drug pricing with Bayh-Dole price-based march-in schemes or grant recovery based on royalty claw-backs all add investment uncertainty that threatens today’s primary research commercialization dynamic. But nothing poses a greater threat than canceling federal R&D funding. We know the answer to Manjoo’s question. We have seen this movie before. We have witnessed mega tech-driven “patent reform.” Yes, the private sector may spend more on certain kinds of basic research that is awarded for non-defense federal R&D allocations, but big tech “patent reform” behavior has taught us how little the efficient infringer bigs care about the public’s welfare.

Here’s a preview:

  • Private sector basic science study is early-stage in nature, but it is not curiosity-driven. It is funded to gain first-to-market profit in future verticals like AI and machine learning.
  • They will pursue inherently selfish objectives regardless of whatever harmful effects their tech mastery may impose on the rest of us.
  • Rather than adhering to the rule of law, the rules of the jungle will govern their activities.
  • They will use their resources to preserve their incumbencies not to advance technological progress.
  • Rather than encourage innovation, they will suppress disruptive innovation while controlling their own.
  • They will work together to depress pricing of components
  • They will say or do anything that helps them achieve their objectives.
  • Top-down control can oppress bottom-up distributed creativity, whether exerted by the government or the FF.

Patent reform has taught us well. We applaud private sector research and the firms engaged in it. We support its encouragement in our taxation system. The most important reason to increase R&D spending is that we not allow these digital platforms to be the only source of technological progress in the digital age. Uncoupling such research from its societal benefit and replacing it with FF’s corporate objectives is not only a recipe for the collapse of research university research, but it will also smother digital economic progress itself except for the dominating platform incumbents who are called the “Frightful Five” for a good reason.

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