PROFITS OF SCIENCE: The American Marriage of Business and Technology By Robert Teitelman. BasicBooks, 258 pp., $23.
At some point, you’ve probably encountered a lottery fanatic pursuing a “scientific” approach to hitting the jackpot. Success is in the system, they’ll tell you, as they pore through piles of old newspapers in an effort to determine the numbers most likely to come up next. Meanwhile, who usually wins? The woman who plays a permutation of her phone number and her zip code, or a guy who pencils in the birth-dates of everyone on his wife’s side of the family.
There’s a parallel lesson in Robert Teitelman’s latest book, “Profits of Science: The American Marriage of Business and Technology.” The technology business is a lot like the lottery in that serendipity-and capital investment-often play as much of a role in commercial success as scientific expertise. Doubters are encouraged to consider four major technology-based business developments in the post-WWII period that Teitelman examines in detail: television, microelectronics, computers, and biotechnology. Those who might be wiser for the effort include investors, executives, academics, and misguided technocrats who support industrial policy.
Teitelman, a senior editor of Institutional Investor, writes in an easyto-read, narrative style. Essentially, he asks the commonsense questions any investor might ask. Teitelman covers the highs and lows of technology-driven innovation in the
Along the way, he underscores a number of points:
- Smaller companies with insight into fast-changing markets frequently outperform lumbering giants that insulate themselves from the outside world.
- Particularly for start-up firms in biotechnology and other trailblazing areas, there are advantages to arrangements that pool capital and diffuse risk.
- Larger companies may benefit from the surveillance of activist boards of directors and outside investors.
- Standards may stifle innovation.
- There are serious limitations to the concept of technology transfer, an incomplete supply-side “half” system that assumes a linear process from discovery to business development to selling.
Academics come in for a share of criticism: Teitelman casts doubt on the assertion that there is a direct link between their research and developments that are of immediate economic or social value, and hence merit government funding. He also takes to task bureaucrats who use this research to support industrial policies, including the funding of “precompetitive” research and research for “national priorities.” Such policies are based on a lingering belief that the government-funded scientific successes of the World War II era, including The Manhattan Project, can be replicated in the civilian markets. This isn’t necessarily so, because a peacetime economy places more stringent limitations on technology-based success. In wartime, product performance is the primary criterion of success. When the boys go home, product utility, manufacturing costs, the scale of private investment, and fickle customer tastes become the benchmarks.
Teitelman’s pronouncements on government subsidies and capital-pooling form an interesting juxtaposition against current events. Was it Sematech or the innovations of smaller companies that resurrected the chip-manufacturing industry and bolstered
Ultimately, Teitelman reserves his strongest prescription for denizens of the Capitol: If you want to help, quit meddling in markets and focus on the bigger picture: creating the economic conditions to support innovation by reforming tax policy and supporting deregulation. In a more favorable climate, investors will furnish the capital needed to “fuel” the engine of technology growth.
If you can’t do that, the best action may be no action at all. In other words, Uncle Sam, keep out.
Donald N. Frey is a retired Bell and Howell Co. chief executive and current professor of Industrial Engineering at Northwestern University in Evanston, IL.