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PUBLICATIONS

U.S. Department

of Commerce

National Bureau

of Standards

NBS Special Publication 627

Science and Technology

Science and Technology:

The Challenges of the Future

Proceedings of the NBS 80th

Anniversary Colloquium Series

February-March 1981

Donald R. Johnson, Editor

National Bureau of Standards

Washington, DC 20234

U.S. DEPARTMENT OF COMMERCE

Malcolm Baldrige, Secretary

NATIONAL BUREAU OF STANDARDS

Ernest Ambler, Director

Issued May 1982
Library of Congress Catalog Card Number: 82-600544

National Bureau of Standards Special Publication 627

Nat. Bur. Stand. (U.S.), Spec. Publ. 627, 85 pages (May 1982)

CODEN: XNBSAV

U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON: 1982

For sale by the Superintendent of Documents

U.S. Government Printing Office, Washington, DC 20402

Price $4.75
Abstract

hallenges to science and technology in the 1980s are discussed in a series of six lectures by distinguished

speakers of national and international reputation. In the first lecture, Dr. Lewis Branscomb, Vice President and Chief

Scientist of IBM, discusses the roles of the Department of Commerce and the National Science Foundation in the future. Dr. Branscomb draws heavily on the experiences of the Japanese

industrial community. Mr. William Carey, Executive Officer, AAAS,

follows with his views on the interrelationships between

Government, science and the society in the 80s. Carey emphasizes

that science will play a key role in the future and that the scientific community must not be passive, but rather must accept

responsibility for the impact its technology will produce. Dr. Arthur

Bueche, Senior Vice President, General Electric Company, focuses

specifically on Government-Industry relationships in the 1980s. A

hypothetical "earthworm crisis" is used by Bueche to illustrate his view of the future. In the next lecture, Dr. Arno Penzias of Bell Laboratories shares his thoughts and ideas about managing

research in a changing environment. Penzias emphasizes selection

of the right people and providing them with an environment to succeed. Mr. William Miller, President and Chief Executive Officer of SRI International, then discusses the national technological edge

that the United States possesses in computer software. He traces software development in the United States and discusses our ability to capitalize on this technological advantage in the future. In the last lecture, Professor Richard Nelson of Yale University relates technological advantages to productivity and growth from an economical point of view. Professor Nelson delineates a sharply

defined and rather narrow role for Government in industrial research

and development.

Key words: fundamental research; Government-industry

relationships; industrial technology; NBS 80th Anniversary;

productivity; science; software edge.

iii
Preface

hosted a series of lectures by six distinguished speakers of W national and international note who discussed the

mm challenges facing science and technology and, thus, the

Bureau in the coming years. This publication contains the texts of these presentations, along with transcripts of the question-and- answer sessions following the presentations. The lecture series was

organized by Dr. Donald R. Johnson of NBS with the very able

assistance of Mrs. Carol Shipley in making arrangements for speakers and handling the manuscripts. The staff of the NML Text

Editing Facility are acknowledged for their substantial contributions

of typing and editing support.

Opinions expressed in these papers are those of the authors, and not necessarily those of the National Bureau of Standards. Non-NBS authors are solely responsible

for the content and quality of their submissions. The mention of trade names is in no sense an endorsement or recommendation by

the National Bureau of Standards.

iv
Contents

The Competitive Challenge to U.S. Industrial Technology

R&D Responsibilities of Government Agencies, Universities,

and Industry 1 Lewis M. Branscomb, Vice President and Chief Scientist, International Business Machines Corporation

Government, Science, and Society in the 80s 17

William D. Carey, Executive Officer, American Association for the Advancement of Science

Government-Industry Relationships in the 1 980s 27

Arthur M. Bueche, Senior Vice President,

General Electric Company

Managing Research in a Changing Environment 43

Arno A. Penzias, Bell Telephone Laboratories

The Software Edge 51

William F. Miller, President and Chief Executive Officer,

SRI International Technological Advance and Productivity Growth:

The Roles of Business and Government 69

Richard R. Nelson, Yale University

v
Dr. Lewis M. Branscomb, vice president and chief scientist of International Business Machines Corporation, is responsible for guiding the Corporation's scientific and technical programs to ensure that they meet long-term needs. He joined IBM in May 1972.

A noted physicist, Dr. Branscomb was appointed director of the National Bureau of Standards by the President in 1969 after a

research career at the Bureau since 1951.

Dr. Branscomb was graduated from Duke University summa

cum laude in 1945. He was awarded M.S. and Ph.D. degrees in physics by Harvard University in 1947 and 1949.

Among his affiliations, Dr. Branscomb has been a member of the President's Commission for the Medal of Science and the

President's Science Advisory Committee. He is a member of both

the National Academy of Engineering and the National Academy of Sciences. In 1979 he was appointed by the President to the

National Science Board, and in May 1980, he was elected chairman.

A fellow of the Royal Society of the Arts, Dr. Branscomb was the

1979 president of the American Physical Society. He is a director of both Mobil Corporation and General Foods Corporation.
The Competitive Challenge

to U.S. Industrial Technology

R&D Responsibilities of

Government Agencies, Universities,

and Industry

As the American public focuses its attention on

the state of our economy, now challenged around the

world by technically competent, progressive competitors,

calls for Government action and changes in Government's role are increasingly heard. In the civil sector the attention focuses on new roles for the

Department of Commerce and the National Science

Foundation, as exemplified by the proposal for a

National Technology Foundation. Defining the proper

responsibilities of these agencies, establishing the

needed resources and managing them properly will constitute a major challenge before the Administration

and Congress in the next few years.

ot long ago, I read in the Washington Star how a subcommittee of the House of Representatives had

concluded that, in trade terms, America is "Japan's

plantation," supplying wood and crops to Tokyo in return for high technology products.

Those of us in the scientific and industrial communities have

been debating the importance of science to the economy for 30

years. But it was not until the Japanese showed us how to do very

well the things we thought we were best at, that the whole country

decided to take this issue seriously.

This concern has generated lots of presidential commissions

and studies about innovation, productivity, basic research,

engineering and technology, and a number of bills intended to promote all of them.

Some Americans want us to copy the Japanese, and turn the Department of Commerce into MITI. And some Japanese tell us what they think we want to hear. For example, I recently asked a Japanese colleague what was the greatest strength of his computer

development group. "Our people are very innovative," he said. "What do you mean by 'innovative'?" I asked. "Each engineer is innovative every day." he replied. "He comes to work knowing

precisely his goal for that day, and doesn't go home until it is achieved."

1
That is the kind of innovation we all respect. Hard work,

personal savings, and concerted national action have brought the

Japanese from the ashes of World War II to the most

technologically ambitious economy in the world today. Meanwhile,

the United States has allowed itself to get inefficient, self-indulgent,

short-sighted, and unsure of its future. There are almost as many views as to how the United

States got itself into this fix, and proposed solutions, as there are economists who espouse them. Every expert has a pet villain, and

most of them are probably right. Lester Thurow, a distinguished MIT

economist, calls it "death by a thousand cuts." Perhaps the cruelest cut of all is that many people believe

America has somehow lost its knack for innovation. Government

attention has focused on innovation ever since the Charpie report,

put forward by the Commerce Technical Advisory Board 2 decades

ago. People tend to think of new products when you mention

innovation. But our economic problems are at least as much or more related to sluggish productivity growth as to lagging product

innovation. Where the Japanese show their strength is in process

and manufacturing innovation, and very quick adoption—often with

superior engineering design for manufacturability—of the product

innovations of others.

Professor Thurow, whom I quoted earlier, has recently

published a book called "The Zero-Sum Society." He notes that Americans save only 10 percent of their GNP, compared to 15

percent in West Germany and 20 percent in Japan. This shortfall in capital formation contributes importantly to obsolete factories and

forms a barrier to the introduction of new technology.

Thurow estimates that to bring American savings up to even

the German percentage would require a diversion of $1 14 billion in consumption to savings and capital investment. That calls for a

formidable amount of self-restraint in a society that has become too

self-indulgent.

What about our technology base? We Americans have

become accustomed to a new experience, we now expect leadingedge technology in Japanese and some other foreign products. We

expect quality and sophistication where once we looked to foreign

suppliers for the cheap and imitative. Even in computers, an area in which the U.S. still is world

leader, the Japanese have declared their determination to achieve a

position of technological parity, if not leadership, whatever the resources and however long it may take. The skill and determination

they bring to this effort does not exceed that of the U.S. companies

with which they compete. But the commitment of the entire citizenry,

and of the government as well, to the achievement of this goal is very impressive.

Let us take a more detailed look at the computer industry

and the Japanese challenge. In comparison with the historical performance of other industrial sectors, by every measure these are

extraordinarily healthy and successful industries. Gleams in the

2
scientist's eye as recently as 30 years ago, the U.S. data processing

industries produce $70 billion dollars of revenue for our economy

here and abroad, exhibit a long-term growth rate of 13 percent,

employ 700,000 workers in their American operations and are generating new jobs at roughly the rate of 50,000 per year. They are

industries whose profitability has financed much of their own growth

and at the same time attracted a substantial amount of equity

capital, financing hundreds of new business entries into the industry

every year. They are therefore extraordinarily competitive industries, as measured both by new entries and by rapidly falling prices in conjunction with performance and functional improvements, and

they exhibit a remarkable rate of introduction of new technologies

and new products.

Any industry exhibiting this kind of technological and

business dynamism is always in a state of change, and there are always challenges to be faced. As we move into the next generation

of microelectronics technology, we will find the cost of entering the

microelectronics business rising because of the great complexity

and cost of production tooling. End-user product manufacturers will find the technical complexity of designing products in the most

advanced technologies a substantial challenge. We therefore see many companies moving towards a vertically-integrated capability; that is, the ability to make both microelectronic components and to deliver end-user products incorporating them.

Another measure of the state of health of this industry is the

extraordinary attention being paid by the governments of other

nations to developing their own competitive capability. These

competitive challenges testify to the success of an industry whose

roots lie within American ingenuity and business leadership.

The Japanese certainly are our most rapidly advancing

competitors. At the present time, their penetration of U.S. computer

sales is modest, but they enjoy enormous success in consumer

electronics broadly. They are just beginning to be a significant factor

in the U.S. semiconductor industry. They do have a way to go, and

there is no reason to panic. In Japan itself, only last year did a Japanese company exceed IBM's wholly-owned Japanese

subsidiary in domestic gross revenue. There is no reason for complacency, however, for the

Japanese rate of technical progress is truly impressive. In terms of integrated circuit components, the fundamental devices on which

computer and consumer electronic products are based, Japanese

shipments increased from 19 percent of the worldwide volume in 1977 to 24 percent in 1979 while exhibiting an average absolute

compound growth rate of 56 percent. In the same period, Japanese

investment in integrated circuit research and development has

increased from $120 million in 1977 to $258 million in 1979, an average compound growth rate of 46 percent. At the present time, IBM is the only company shipping

64,000 bit-per-chip memory devices in large volume, but I believe all

3
of us are impressed by the quality of Japanese 16,000-bit products,

by their costs, and—most importantly—by the technology base they

are building with which to challenge us both in components and in computers and other products in the mid-80s. There is little question

that their rate of progress represents a serious challenge to the

U.S. -based industry.

This extraordinary rate of progress in Japan has many

sources, of which I believe the following are most important:

a. Japan focuses its priorities on sources of economic strength—not weakness (as our government often seems to do). There is a

national consensus in Japan that the information

industry is to be one of the strategic industries on

which the Japanese base their future. Every

Japanese worker, government employee, and

citizen understands that. They act accordingly.

b. Both government and industry in Japan focus on competition in technological terms. The

Japanese seem to be able to forego near-term

profitability in the quest for long-term strategic

industrial position. Japanese managements

understand the key leverage of technology, and

their investors and bankers back them up.

c. The involvement of the Japanese government

in the development of their key industries, in designing favorable tax and other financial arrangements for strategic industries, and in taking a very aggressive position supporting their companies' trade activities. d. By no means least important in this list is the

quality and dedication of Japanese workers and

management, the quality of their educational

system and its production of engineers (twice

ours), and the prestige which manufacturing

technology and factory performance enjoy in the

Japanese technical community.

These four areas of strength have little to do with research

capability or scientific attainment. But it would be very wrong to imagine that U.S. scientific and engineering capability do not merit

priority attention by government as well as the private sector as we

seek to generate our national strategy for economic revitalization. To clarify the issues, let us look again at our computer and

microelectronics industries and ask the chicken-and-egg question: Is the health of the U.S. microelectronics industry driven by

technological progress or by market opportunity? The answer to this often-asked question is "both." Neither factor alone can keep the

industry healthy. Scientific and technological progress has permitted

4
the production cost of a given electronic function to fall annually by more than 26 percent, on the average, for 25 years. This falling cost, reflected in a highly competitive industry by prices falling at the same rate, both permits and requires volume growth in electronic

shipments. This aggregate volume of shipments has grown faster than unit costs have falien. That is, the demand elasticity for electronic and computer products has exceeded the technology's

productivity gains and has led to very large growth in the physical

volumes of manufactured goods and to net revenue growth in the

industry. An industry with revenues growing at 13 percent which

enjoys a technology price/performance improvement trend of 27

percent, is thus delivering 40 percent more computational power or other electronic capability to its customers every year, reduced

perhaps to 30 percent by inflation. Thus, the U.S. computer industry as a whole is exhibiting a

real growth of more than 13 percent per year, minus the penalty of

inflation. Unless this real growth continues, the demand will not be

sufficient to generate the revenues that permit the reinvestment in technology that will continue, the price/performance trend. Thus, this very strong sector of the U.S. economy could fall on hard times if there should occur a failure of the upward spiral of growth, in which customer demand more than compensates for the

ability of technology to reduce prices. This upward spiral could turn

into a downward spiral, in which volume growth fails to produce

revenue to cover falling prices. Then, companies would only be able

to hold the profit margin needed to keep the technology going by

cutting back on employment, and revenues would fail to generate

capital to buy the tools to exploit the technology. Such a failure could occur for any of the following reasons:

a. Failure of the technology to continue to advance sufficiently rapidly.

b. Appearance of obstacles to demand-growth,

such as government regulatory restrictions or a

shortage of key science and engineering skills. c. Factors that unreasonably escalate costs

(such as inflation, cost of capital, or tax increases).

d. Failure to compete internationally, for whatever reason. How can we avoid these four pitfalls? The new

administration is set on a course to address the regulatory and

economic factors that can stifle demand growth, unreasonably

escalate costs and restrict access to capital to finance growth. I assume the administration will also continue to pursue a fair and

free trade policy based on the provisions of the GATT, which

became effective in January 1981. These are indispensable steps

toward a significant stimulus to private investment in growth

industries. Companies can be expected to raise the needed funds to

5
invest in product development and manufacturing technology, if inflation moderates, the cost of capital falls and investment is encouraged.

But what about the wellsprings of that technology, and the

training of the technically skilled people to ensure continued

advances in the technology in the face of fierce international

competition?

The right kinds of governmental investments in science and

technology are not only welcome; they are urgently necessary. But

when the American Government seeks to stimulate industrial science and technology by direct action, it often runs into difficulties. The Bureau of Standards has seen such attempts made off and on for three quarters of a century. Old timers will remember the

Civil Industrial Technology program, which proved a lightning rod for private sector objections to being helped by government

technologists. The history of the AEC's encouragement to the

commercial nuclear power industry is—in retrospect—no model for the government/private relationship. For out of the government's own conflicted role as both regulator and promoter of nuclear power

came the legacy of lost public confidence that throttles the industry

today.

The most recent and ambitious venture into public financing

of private technology is the Synthetic Fuels Corporation. In this case

it is clear that the government has undertaken to accept

responsibility for making investment decisions for the oil industry,

having captured the revenue for high risk investments through the

"windfall profits" tax. The Reagan Administration is likely to back away from these

forms of direct intervention. The Administration will still have to decide what forms of indirect science and engineering support are

justified.

One form of indirect support attempts to identify "generic"

technologies for federal support, such as those authorized in the

Stevenson-Wydler Act, enacted last year. The idea of generic

technology centers would not be bad if they focused on

nonproprietary, publishable research, generally known to be useful

by the broad community of industrial scientists and engineers. The

difficulty arises when the word "technology" is invoked, since it is difficult to pursue technology in the absence of economic tests and

market requirements.

If government-sponsored programs move closer to economic and market criteria for success, the political complications

grow, for it becomes necessary to put the direction of such

laboratories under the influence of industrial competitors. A host of

difficulties may then ensue, ranging from competitively biased

technical judgments to antitrust problems. On the other hand, if such laboratories attempt to work on commercial technology without

the guidance of those aware of the economic and market

requirements, a good deal of technical effort and money can be

wasted.

6
I do not intend a blanket rejection of such proposals. Indeed,

IBM participates in several university-operated and governmentsponsored applied research programs in which a number of companies take part. I only observe that it is not easy for government to invest effectively in commercially important

technology, without encountering political complications.

A classic example is the attempt of the Carter Administration

to bolster the competitiveness of the beleaguered U.S. automotive

industry by federally sponsored research. Caught between

Congressional exhortations to "re-invent the automobile" and

skepticism about a government agency's ability to manage an

automotive technology effort, the Carter Administration adopted a

plan for basic automotive research. The Department of Transportation would ask NSF to manage a program in fields of potential importance to automotive technology.

This project, acronymed CARP, was one of the first to be

struck down by the incoming administration. It was indeed a wholly

unobjectionable project as far as research content was concerned.

But it was very vulnerable to the objection that the public

expectation for results would not be matched by the project's reality.

A "basic research" program to "re-invent" the automobile is a

contradiction in terms.

1 Thus, I believe there is general recognition of the need for restraint in government initiated attempts to engage in commercial

research, while there is growing conviction that a growing share of the federal research investment should be made, with ultimate use

by the private sector in mind. Yet there is confusion in how these

seemingly contradictory principles can be accommodated. This

confusion has part of its origin in differing perceptions about basic,

applied, and engineering research.

We have arrived at a point—in the evolution of technology

policy—where the thrust is "back to basics" and common sense

must be allowed to prevail. We will no longer deceive ourselves that a government agency can do a better job than private industry at evaluating the economic and market potential of alternative

technologies. But I believe this administration must and will accord a

high priority to strengthening the science and engineering research

base on which private investments can build. This brings me, then, to the question of research and

education strategies for NSF and the Department of Commerce.

The time is at hand to focus federal energies on the central government's unique responsibility for the nation's scientific and

technical infrastructure. Key to this view of policy is: a. a more sophisticated view of the common

distinctions between "pure" and "applied" research;

1 Lewis M. Branscomb, "Opportunities for Cooperation Between Government,

Industry and the University," Annals of the New York Academy of Sciences, Vol. 334 (December 14, 1979), 221-227.

7
b. a focus of federal concern on engineering

capability as well as scientific excellence;

c. development of stronger ties between university

and industrial research;

d. federal investments to ameliorate serious

shortages in key technical skills; and

e. attention to the knowledge and services with

greatest potential to increase research and development effectiveness. Let me speak to each of these points. I have long believed

that the NSF's distinction between basic and applied research has

confused public policy in a most detrimental way. I have expanded

on this view at length in a recent paper at The American Physical

Society's New York Meeting. 2

1 will summarize the point by noting

that the NSF definition rests on the motives of the investigator. (Am

1 exploring the unknown driven by curiosity? (basic research) or am I looking for an answer to someone else's question? (applied

research).) Useful as this may be to sociologists of science, it is not very helpful to investors in research, including the Federal

Government. What matters to the investor is, what is the likelihood that this research will lead to ideas or information of great

significance or value?

There are, in fact, two classes of applied research funded by

government. One is what I like to call useful or applicable

research—known to be productive of ideas and answers that can be

put to good use. This useful science is really not distinguishable

from the conventional notion of "basic" research, except that a

fraction, actually a very small fraction, of basic research deals with

notions unlikely to find application very soon. The second kind of applied research is what I call "problemfocused" research, which purports to address and even provide

solutions to identified societal problems. There is nothing wrong with

investing federal money in such problem focused research. It is the

primary activity of the "mission-oriented" agencies. But in most

cases it is not the right way to use either universities or national

laboratories, for problem-focused research should be carried out in institutions able to solve the problem when the research is done.

Usually this will be the private sector unless the problem lies within

the sphere of governmental responsibility.

In 1969, within a month of becoming Director of NBS, I sought a meeting with Dr. William McElroy, then Director of NSF, to

solicit his interest and cooperation with NBS in what I called the

"useful sciences." After a few months, I was given the opportunity

to address the NSF senior staff. I confess my ideas fell then on

infertile soil. But today there is a more sophisticated view of science

and engineering and their dimensions of value to American society.

2 Lewis M. Branscomb, "Physics—Used and Unused," Physics Today, March 1981.

8
The NBS has encouraged and endorsed the policy of the

NSF to integrate basic and applied science in all its research

directorates. This provides the opportunity to pursue research of high value and significance in all the science and engineering

disciplines. The NSF will continue to focus on investigator-initiated,

competitively evaluated research but it will be in a much stronger

position to respond to opportunities and urgent needs and to explain

to its publics the value of its total investment in research.

This should put NSF in a stronger position to help university

investigators to explore the excellent and useful areas of scientific and engineering work such as those pursued at the National Bureau

of Standards. By the same token, I hope NBS will continue to make

seminal contributions to science, taking full advantage of the

Bureau's measurement skills to open new doors to discovery.

The second issue requiring attention is the status of engineering capability in the U.S. There is no doubting the crisis in American engineering. The Japanese, with a smaller population,

outproduce us in engineers two to one. Our engineering faculties are depleted. Two thousand tenure track faculty posts stand vacant.

Instructional equipment is so outdated, many engineers must start

their technical education anew after they are employed in industry.

And, even in a recession, recruiting is especially fierce for electrical,

computer, and chemical engineers. Fifty to 60 percent of the

engineering graduate students are foreigners, and the ratio continues to rise as the fall-off in the number of engineering Ph.D.

candidates—a fall of 30 percent in 10 years—is almost entirely restricted to the U.S. citizens. The NSF's primary role is to support research in the

engineering disciplines. To this end an Engineering Directorate is being created with the intention of strengthening research in these

fields. Secondly, NSF has renamed its education directorate

"Science and Engineering Education" reflecting new priority we

intend to accord to ameliorating the crisis in engineering education.

The NBS does not believe that these responsibilities should

be removed from the NSF and relegated to a new National

Technology Foundation. They are our proper job, and we intend to seek the resources to do it. But the tasks proposed for the

Technology Foundation are important and most of them do belong

properly, in my view, to the Department of Commerce and to the

NSF.

I believe the Commerce Department should share with

others concern for the quality and availability of professional

engineers and technicians, as well as the retraining of engineers in midcareer. The Department should be knowledgeable about the

strong and weak components of the technology in different

industrial sectors, and seek to focus national policy toward support

for areas of strength and opportunity.

Most important, the Department should focus attention on

the factory as an institution deserving respect and offering

g
rewarding technical challenge. The prestige of manufacturing

engineering needs to be restored by an infusion of the most

advanced technical ideas and talent. Modern engineering design,

production control, process technology, materials strategies—all these are areas of technology which the DOC should understand

and whose health in various sectors can be assessed. I do not propose DOC should finance the needed improvement in industry,

but DOC might well finance, in collaboration with industry, some of the needed upgrading of our engineering schools' capabilities,

particularly those capabilities that could rapidly upgrade the

productivity and technical agility of our manufacturing institutions. Indeed, much can be accomplished without substantial federal

expenditures by encouraging research collaboration between

university and industry laboratories.

The National Science Foundation has a substantial program,

which is being expanded, of grants to such collaborating partners.

The funds may flow to either partner; the work is reviewed by

technical peers and evaluated; and the results are expected to be

published.

The real benefits from such a program go well beyond the

specific research it finances, however. The most effective

mechanism for ensuring that our technology properly stimulates our

science, and that the science illuminates and sparks new

technology, is to maintain the highest degree of cooperation and

interchange within the professional, engineering and scientific communities that cut across university, industry, and government

research enterprises.

An alternative approach to encouraging this interchange with

universities also merits serious study, in my view. Congressman

Charles Vanik of Ohio introduced a proposal last year (the Research

Revitalization Act of 1980) to permit companies a 25 percent tax

credit, in addition to the normal business deduction, for contributions

to university-conducted research.

This, in effect, allows the government to underwrite the cost

of university research that has been undertaken as the result of agreements entertained by the university and a company, without

government's direct involvement in those discussions and

agreements. This approach has the virtue of minimizing the

overhead expense and the bureaucracy attendant to receiving a

direct grant of government money.

It puts the responsibility for deciding what university research

is of greatest interest to industry in the hands of industrial scientists

and engineers. It puts the responsibility for determining what

industrial research needs are appropriately responded to by

universities squarely in the hands of the university faculties. And it permits microdecisions on both issues to be made in the context of

specific relationships.

I have already spoken to the issue of key technical skills. This is an area where the administration has yet to define a clear

view of federal responsibilities. I am convinced that however

10
diligently the states attempt to bolster science and engineering

education, the effort will fall short without a federal leadership.

Industrial philanthropy today meets 2.6 percent of the operating costs of our research universities, public and private. Even a major

expansion of industrial support will not relieve the Federal

Government of its leading role. Finally, let me turn to the technical information and other

services, offered on a national level, to promote the objectivity,

efficiency and progress of both public and private research and

development activities. Looking back over all the decades, there

has been controversy from time to time about the extent to which

the NBS should focus on help to specific industries or the amount of investigator defined basic research the NBS could afford. But, there

has never been any doubt about the value of the Bureau's work in measurement science, materials characterization, test methods, and

properties of natural matter and useful materials. To be sure, the

Bureau has never claimed exclusive jurisdiction over these services.

Nor has the Bureau failed to recognize that the information industry

has an important role in providing access to this great body of useful information. But now that the view of government in a limited, helpful role has the endorsement of the electorate, the time is ripe for recognition- of- the extraordinary value to industry and to science of the basic NBS services. The Bureau^s-work in measurement science

belongs in the priority core of the Nation's science investments.

This work is invaluable to industry, but is so widely shared it will not be performed or paid for by industry. And its value to the effective

progress of science is just as unique as is its value to the efficiency

of industrial research and development. Here too, categorization of work into "basic" and "applied" is mischievous and not helpful in making research investment decisions.

How can these four ideas be applied to microelectronics

technology? Regarding "basic" and "applied" research, the

problem is bypassed by the totally new and dynamic character of the fields engaged in it, from applied mathematics to solid state physics, ceramics, polymers and metallurgy, computer science,

electrical engineering, production control, automated design,

development and test. University-industry collaboration has arisen quite

spontaneously, and with very little federal stimulation or support. In California, North Carolina, and Minnesota, the Governors have

personally led the call for state investment in university-operated

microelectronics science and engineering. Companies have

invested hundreds of thousands of dollars in programs at schools

such as Cal Tech, Stanford, Berkeley, Purdue, Minnesota,

Duke/UNC/NC State, and Cornell. But sooner or later, the Federal

Government will have to come forward with substantial, continuing

support.

Finally, the technical base for this technology touches about

every area of NBS interest and competence. The NBS Very Large

1

1
Scale Integrated circuit initiative can be very helpful by helping

establish a firm foundation of meaningful and practical

measurements on which all productivity gains must rest. We all owe a debt of gratitude to Congressman George

Brown for generating a national discussion of these issues through

his National Technology Foundation proposal. And I have already

indicated concern about the separation of science from engineering

that is implied in the proposal. But there still remains the primary

and highly desirable goal of Congressman Brown's proposal: putting

together the package of efforts in both NSF and DOC agencies to bolster the technological base for economic revitalization of this country.

This goal can still be achieved by the cooperative efforts of NSF and other scientific agencies, most especially NBS. Our roles are complimentary, but our purposes are similar—ensure that the

scientific and technical capabilities of the USA are developed to the

highest level.

I believe our leading engineers and scientists must make

common cause. We must recognize that scientific leadership is indispensable to industrial leadership, as the Japanese are finding.

We also must recognize that engineering skills guide reduction of

scientific ideas to practice, and manufacturing engineering

determines the productivity industrial workers achieve. If we are to compete successfully in growth industries, we Americans need to

pull up our socks and take an optimistic view of what our brainpower can do to make our economy the world pace-setter it should be. Let us recall what Rudyard Kipling once wrote: "They copied all they could follow, but they

couldn't copy my mind, and I left 'em sweating

and stealing a year and a half behind."

Discussion

Q. My question is related to your comments on the

shortage of engineers. Can you tell me what an engineer working in the semiconductor industry with just a bachelor's degree would

expect to earn coming right out of college without any experience

and also, an engineer with a master's degree and no experience?

A. My impression is that the answer to the first question is in the range of $18,000 to $24,000, and the answer to the second

question is from $21,000 to $27,000. But that depends a good bit on

whether or not the individual is a person with some very specific skill in a shortage area. People with any training in logic design for example are in very short supply. Let me make the observation that the fact that salaries are

not astronomical does not necessarily mean there is not a shortage.

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The problem is that everybody already has a full complement of people that are paid what they are paid, and if you hire people in at 50 percent more than what they used to get you have got to raise everybody in your organization or you have a lot of trouble. So. there are factors that tend to keep that in balance even with the

shortage of skills. Q. Would you like to comment on the standards of present

United States management, with some exceptions: the Harvard

Business School, for example, where it seems that the manager can manage anything without any knowledge of what he is managing.

A. I was in the Navy in World War II and I have always

referred to that as the Navy approach to management. Without

casting aspersions. Navy had a good reason to want to manage that way. The concept in the Navy is that if you have a star on your

sleeve and you are a line officer, whatever your rank, and everybody more senior to you gets killed, you can take command of the vessel.

You are fully equipped and prepared to do so. It is a good principle

because in the Navy you may have that situation in which the

superior officers are all dead and you have got to cope.

I believe that the modern theory of American management is to recognize that managing a complex operation requires more

knowledge and judgment than any one person can reasonably be

expected to have. By this theory, the biggest mistake you can make

is to exercise too much personal opinion, which has a danger of keeping an organization on a course too long, or taking it down a wrong path from which it is hard to get back. Therefore, the style of management that is very common in this country is a deliberate

maintenance of a high degree of turbulence: that is. the

encouragement of internal institutional change.

Now. many countries suffer a terrible lack of the ability to accommodate change, especially within big organizations. I think we

are better at adapting to change than most, although we have a few

spectacular industrial examples where that has precisely been the

shortcoming. Nevertheless. I think that if you look at case examples

of great growth achievements, they have in almost every case been

company founders or sons of company founders who had a very powerful grip on the management, a very strong personal style.

They made judgments about technical as well as market issues and

carried the companies into areas prior to the time that it was

obvious by analysis that those markets were ripe for exploitation.

Small innovative enterprises are still very much alive in the

spirit of this country. There is a tremendous amount of desire on the

part of individuals to have that kind of personal achievement. There

are a lot of investors who are looking for those kind of companies to invest in. The Jack Rabinows of this world are not dead yet. Q. I think it is a disease in the United States. Would you like to comment about the conglomerate business, which unfortunately our country gets involved with, like where 200 people manage 500

different kinds of companies.

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A. Well, I think it is a fairly logical consequence of the style of management that I just described. First of all, it is a way of diversifying your risk. If your management does not have a personal

dream and conviction of what the right business is to be in, the right answer is get in six businesses and find out. Sell the ones that do

not work, and buy more if they do. I am not sure there is a big

difference between a diversified holding company and a big

investment bank which quietly and behind the scenes does the same thing. But they have to understand that what they are doing is financial management of capital, and not deceive themselves into believing that they are running companies. It often happens that they slip over into that latter mode and ruin the companies they

acquire. I think one of the proofs of your point is the vigor with which

the best managed middle-sized but rapidly growing companies fight

being acquired, even though the average ratio of offered price of stock in acquisitions is 1 .85 times the market price.

Q. The Institute of Molecular Science in Okazaki—would

you like to comment on analogous institutions in Japan in relation to the Bureau?

A. Unhappily, I have not visited any Japanese institutions that are analogous to the Bureau. The institutions that I know in Japan are all manufacturing enterprises with which we have one

kind of business relationship or another. I am very impressed with

the personal knowledge, conviction and vision of the chief

executives with respect to the technology they are trying to master. They really do see things in technological terms. They see things in a much longer time-frame than we do here. That is partly because

our industrial managers face more uncertainty in an economy that is deliberately highly competitive, fractured, and contentious. Japan is a pretty close and homogeneous society and they work hard at knowing where they are going to be in 15 years without getting

sidetracked.

Q. You commented on the quality of the Japanese efforts. We are indebted to an American for that: W. Edwards Deming, who

is a friend of mine. Immediately after the war, he went to Japan and

gave a lecture on quality control, and he received a medal of effort. Each year one Japanese is given this award because of their accomplishments in quality control. A. The Deming Award is the highest valued prize in Japan

short of the Emperor's medal. There are a lot of things in Japan of the sort that he has stimulated that are truly impressive. They are

not unknown in this country. It is just extraordinary the extent to which you find them everywhere in Japan. For example, in this country it is very common for quality control to be thought of as a

set of tests made in the course of production to figure out which of the products are bad. These bad products are then disposed of in order to avoid shipping them to the customers and thus reduce the

14
shipped product defect level. That is not what quality control should

be for at ail, as you pointed out. Quality control is for the purpose of making sure that the

process you are running stays in control. If the quality control

measurements are part of that process control loop, the process

stays in control and all of the product is good. The right outcome

from a properly quality-assurance controlled production line is 100

percent good.

Another impressive thing that you see in Japan is the

personal dedication and interest of the workers and how they relate

to the production process. I remember seeing the production line for videodisc players, which are produced in a joint venture between a

partnership that we are in with the Pioneer Corporation in Japan.

The key part of this videodisc player is the optical laser servo mechanism. To assemble these players, they have a conventional

looking production line worked mostly by young girls. There is a

conveyor, but the conveyor is not driven by an external time scale. Each worker completes the work at her station and pushes the work

on to the next worker. But there is a detour in the middle of this line where that optical servo is assembled. That is in another room, next

door, with a glass wall between the rooms. It is a clean room, and

the first thing you notice is all the workers are about 15 years older

in there than they are in the first line. Clearly, a picked team. Again

mostly women, but obviously experienced, mature, trained people.

The second thing you notice is that the production line is still a

conveyor, but in this case it is all hot assembly. At each work

station, the first thing they do is put the thing in a jig and plug it in. The laser is on and the electricity is on while they are adding the

mirrors and other devices. They assemble, adjust, and test all in a

single operation, unplug it and pass it on to the next worker who

plugs it in again and adds more pieces. The result is they make that very complicated videodisc player for a few hundred dollars. Q. What do you see as the future of small companies in the

computer field? A. A microprocessor obviously has been yesterday's answer to the small company's problem. There they get the logic

very cheaply, and then they put the other circuits in and the costs

are not so bad that they cannot compete very well indeed. Software

will be a profitable business in the 1990s, with the 80s as the

transition. But, I think we will see the evolution of what has been

analogous to the microprocessor in the past. I think the whole CPU

will become an OEM product that is built to standard interfaces,

manufactured in large volume. Small companies will now buy an

entire CPU and integrate it with the disk files, the printers, the

communications gear and what not. Increasingly, the systems

configuration of the software and the user interface will be the

ultimate competitive advantage.

15
William D. Carey is executive officer of the American

Association for the Advancement of Science and publisher of Science and Science 80 magazines. Carey joined the Association

following 6 years at Arthur D. Little, Inc., where he was vice

president in charge of public affairs. Prior to joining Arthur D. Little, Inc., Mr. Carey was assistant director of the U.S. Bureau of the

Budget, Executive Office of the President.

He was graduated from Columbia University with a Phi Beta

Kappa in 1940, received the M.A. in public law and government in 1941 from Columbia, and the M.P.A. in public administration from

Harvard in 1942 while a Littauer Fellow.

He is chairman of the U.S. side of the bilateral group in science policy of the U.S./U.S.S.R. Joint Commission on Scientific and Technological Cooperation. Chairman of the NBS Statutory

Visiting Committee, he also serves as a member of Brookings

Institution's Advisory Committee on Government Programs.

Mr. Carey is a member of the Board of Trustees of the

MITRE Corporation and the Russell Sage Foundation, and he is on

the Board of Governors of the Center for Creative Leadership. In addition, Mr. Carey is a member of the National Academy of Public

Administration, the American Political Science Association, and the

American Society for Public Administration.

16
Government, Science,

and Society in the 80s

A suppose the gentlest rebuke to all would-be prophets was L| administered 30 or more years ago by Samuel Eliot Morrison

wf in his preface to a very good book, Admiral of the Ocean W Sea, the account of Columbus' voyages of discovery.

Morrison was locating the story he would tell in the particular

cultural environment of Columbus' own times—which is what I shall have to do here very shortly, too. Morrison did it by quoting from the

Nuremberg Chronicle of July 14, 1493, a chronicle claiming to report

"the events most worthy of notice from the beginning of the world

to the calamity of our time." I quote Morrison to you: "Lest any

reader feel an unjustified optimism, the Nuremberg chroniclers place

1493 in the Sixth or Penultimate Age of the world, leaving just six blank pages to record events from the date of printing to the Day of Judgment. Then begins a prophecy of the Seventh and final age—

and quoting directly from the Chronicle— "in comparison with which

our age, in which iniquity and evil have increased to the highest

pitch, may be regarded as happy and almost golden: there will be

no faith, no law, no justice, no humanity, no shame, and no truth." But as Morrison observes while the chroniclers were scripting that awful and imminent future, a Spanish caravel named NINA was

running before a gale into Lisbon with news of a discovery that was

to give the old world another chance.

There is a lot of the chronicler's spirit loose in western

society today, including our own very young society. I have found it exceedingly useful to travel abroad with my eyes open, because it makes me very glad to come home where, against just about any

yardstick of comparative well-being and promise, we have the good

society. It is out of shape, but it is good. Its present troubled

condition perhaps was prophetically foreseen a hundred years ago

by Thomas Huxley on his first visit, when after marveling at America's immensity, he said: "Size is not greatness, and territory

does not make a nation. The true question is: What are you going to do with all this? What is to be the end of which this is the means?"

17
His questions still beg for answers. And the answers lie hidden within the ambivalence of a society so blessed with choices,

yet so unsettled in its values, that it lurches in one direction and

then, reversing itself, goes in another. In the space of three brief decades we have traveled the course from global altruism to self- interest, from joyous self-expression to petulance, from arrogance to humiliation and—just possibly—back to arrogance. We have

celebrated our form of governance and groveled in its failings; we

have preened our human rights and iectured others, while ignoring

the three-fourths of humanity who cling miserably to the edge of our

lovely blue and white planet. What matters is the prime rate, the

CPI, and superior quality control in Japanese consumer industries. How shall we answer Huxley? What are we going to do about all this? What is to be the end of which these things are to be the

means?

Three weeks ago, the President told us on television that in the past 20 years our government has spent over $5 trillion, and he

asked "how much better off are we for it?" In his opinion we are much worse off, because what he sees is a trillion-dollar national

debt and stubborn inflation. I would have supposed the mistake was

not in spending the money, but in the failure to adjust the tax base

and the rate schedules to cover the spending, or to hold down the

spending to the ability and willingness of the society to pay. But by

implication, the President was saying that we threw it all away. What

did we spend money for that we should not have? A mistaken war

might head the list, but the going gets tough after that. The big

ticket items, after all, were welfare, medicare, social security,

national defense, revenue sharing, space, and grants to States and

cities for everything from mental health to roads and law

enforcement. California, I believe, got its share. If we are not better

off for it, how do we know? Did we, or did not we, give another

chance to the poor? Did we, or did not we, cushion the elderly

against the costs of major illness? Did we, or did not we, get

something of value from the Apollo mission? I do not for a moment

doubt the President's figures. The government probably did spend

$5 trillion in the last 20 years. While government was doing that, the

private sector was spending $15 trillion. How much better off are we

for that? Were the choices wiser, more cost effective, more fiscally or morally responsible?

Perhaps, but for other reasons, we are not better off. We are a nation of quantifiers. Quads, mpg, CPI, GNP, throw weights, the

population clock, the capacity of the newest micro chip, the pocket

calculator nuzzled up against our hearts. But the other evening I watched a PBS film on Auschwitz. There it was, 35 years later, a hundred acres of grass, barbed wire, and the shells of buildings. But

I saw no people, no visitors, no pilgrims as far as the camera's eye

could reach. Something had been quantified there, too, some part of 6 million. The very silence screamed. But the people in that corner

of our overcrowded planet all were busy elsewhere, turning out

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VW's and hi fi sets and cameras. Even the heartless Russians show

some humanity. If you doubt it, visit the war cemetery in Leningrad

sometime. You'll see streams of people coming and going, in good

and bad weather, old men with ribbons and medals, and children

holding a few grubby flowers. I do not know if they pray, but I can

tell you that they care, after 35 years. Last summer I was in Vienna

with my young daughter, and one day I could not find her. She came

back to the hotel quite late and very pale. It was a while before I found out that, without a word to me, she had taken a morning train to visit the relics of a Nazi concentration camp and to feel the horror

of her century. I do not think that we will find answers to Huxley's

questions by quantifying. If we find them at all, it will be in the

tragedy and the exultation of our human experience. Where else?

Perhaps a child will have to teach us that. My blurred view of society in the 80s is one that you may not

find entirely appetizing. I think that the function of thought is going

to be delegated more and more to the print and electronic seers and prophets, and that the most powerful centers of policy analysis

and interpretation likewise will be media-based. I am not suggesting,

not quite, that the silicon chip is destined to be the Master of the

Universe, but I feel very sure that for as far ahead as I care to look

the media and communications technology will wield transcending

authority in shaping the quality of national choices and the public's

grasp of the meanings of change. I submit that this new power is not, nor can it be, neutral to the value environment which sustains it. Indeed, the possibility exists that as respect for our political and

economic institutions recedes, respect for the authority of the media

will advance. I sense that this transfer of trust is already well- advanced, though still not at high tide, and we have not faced up to the problem it poses for a society designed for checks and

balances. The First Amendment is a great guarantor of citizen freedoms, but its assumptions are fundamentally transformed in an age of communications power that encroaches progressively on

constitutional architecture and preempts those processes of group

negotiation and conflict, the processes of evolutionary social

growth, conciliation, and change on which everything thus far has

depended.

(Just after I wrote those lines for today's talk, I read in the

Washington Star—a paper owned by Time, Inc.—that "in a unique

effort, all of the magazines published by Time, Inc. are joining this month in a common editorial undertaking to explore a single theme:

American Renewal." And in an accompanying article, the Chief

Editor of Time, Inc. stated "the need for renewal ranges well beyond economics, politics, and defense: it encompasses ethics,

moral, social and spiritual values . . . We have not worried about

what seems politically feasible, but about what seems right." I think

this comes very close to illustrating the point I have been making.

We see a very powerful information conglomerate in what is called

the "independent sector" massing its capabilities to come down

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hard on public attitudes and opinions not with news but with

proposals for America's renewal not just in those areas of public

policy confusion like economics, politics and defense, but in the very

personal and private areas of conscience associated with ethics,

social, and spiritual values. One can look at this in different ways: as

a magnificent public service on the part of the independent press, or as a questionable intrusion into the democratic process under the

shelter of the First Amendment. I tend to see it as both, and as

bearing out my sense that a transfer of social authority is under

way.)

I am giving you a problem, not a solution because I do not have one. I will remind you, though, that in just six years we will be

celebrating the bicentennial of our Constitution, and I hope that beyond the parades and fireworks this fortunate nation will take the

time to search its history, its intentions and its institutions, and come

a step or two closer to knowing what we are going to do with all these things.

What seems to be going through our society, as we head

into the 80s, is a passion for dieting, an urge to shed weight. What

weight? To start with, the weight of complexity. The problems of our

national economy baffle and enrage us. The metastasis of authoritarianism throughout the world—and very close to our own

continent—confounds us. The apparent hopelessness of the arms

race paralyzes us. The sense that the world is closing in on the

English-speaking peoples, as the century turns, raises the spectre of a historic defeat. So we are weary of complexity and ache for simplification. We reach for deregulation, tax relief, getting the poor

off our backs, dislike of government, impatience with the third world,

and confrontation politics. How much "better off" will we be when

we have done all this? It is a desperately dangerous state of mind

for the 80s because it mistakes the whole quality of our self-interest,

which does not lie in military and technological clout but in creative

democracy at home and in economic and political reconciliation with

the developing nations. It is in that latter zone of turmoil that the

fuses are smoking. It is the zone of maximum instability, and for the

United States to discount it and allow a vacuum of leadership to open would be a historic blunder from which our recovery would be

very chancy. This, I believe, is the salient problem of choice that bears on our future. It is pertinent to the whole litany of catastrophe

scenarios that you are familiar with, starting with the "Global 2000"

Report—overpopulation, exhaustion of natural resources, terrorism, mass hunger, and the rest. Simplification is a nonstarter, and

stability will not come cheap. Understanding this is the essence of American self-interest. The paradox is that the curve of our national expectations is again on the rise. This is an important political change, representing

at best a long-lasting social consensus or, at worst, a temporary

fever. It has been borne in on a lucky society that it is capable of fumbling its advantage and committing large mistakes. What is good

about this is that it occurred at the high crest of America's power

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and wealth, and it taught us to be careful. That is a useful lesson to go along with power, even in a democracy. And as we get back on

the track of rising expectations it just may occur to us that our expectations are locked into an interdependent global society, one

in which the voting majorities will have to be given a seat at the

table. If they are not given the seat, they will take it for the not-so- simple reason that the resources, the sea lanes, the air space, and

the markets on which our expectations depend will be theirs to dispose of, at a price. The simplicities of the past—protectionism,

the nuclear shield, scientific and technical preeminence, managerial

superiority, the Pax Americana—are not going to help. There is no way that we can go it alone and reach the higher ground that is implicit in the present resurgence of expectations. We cannot just

draw the curtains. (I am reminded of a remark I came across in a book by the Polish writer Kuniczak: "With the curtains drawn, it is possible to close our eyes to the present, ignore the future, and

regard the past with hope and confidence.")

Whether the American political technology is adequate to the stresses of the 80s has a bearing on all this. It is a necessary

question as we think ahead to 1987. The essence of our political

technology is in the separation of powers, the federal system,

checks and balances, and the familiar constitutional guarantees as

interpreted through jurisprudence. It is not a straight-line system for getting things done, nor was it meant to be. And this basic political

technology has been affected deeply by the American experience of national development, economic growth, the progress and

applications of science, and the new global realities. It is a system

that has permitted remarkable experimentation and innovation, yet it is built very close to the ground, and its institutional properties—

apart from size and leverage—still reflect its beginnings rather than a vision of what will have to be anticipated and dealt with.

I shall not go into that subject clinically today, except to say

that our political technology needs to be calibrated in terms of its abilities to manage surprise. It is the play of surprise upon our system that reveals its limitations and defines the risks. I am

speaking of the class of surprises, chiefly of external origins, that

inflicts shock and trauma on the institutional structure. Surprise of that kind deranges, even concusses, the consciousness centers of a large and relatively immobile political system. It is not possible for us to hide from surprise, and we have had enough recent experiences to realize that we are easy marks for it. It is not all that hard to envision the budding surprises that could be waiting for us in the doorways and blind corners of the 80s and 90s. They may be

detected in the monetary system, in superpower miscalculations, in terrorism, in insurgency, in the pressure cooker of incendiary

frustrations and hatreds, and even in religious fanaticism. History

has a way of replaying its tapes.

Our political technology, our statecraft if you prefer, has a

blind side. It treats surprise as aberration, as abnormal. It had better

learn to expect it and defuse it. We heard and read a good deal

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during the last presidential race about the need to follow a

consistent, stable course in our economic policies, energy policies,

fiscal policies, and foreign and defense policies. As scientists, we

also often plead for stable and consistent science policies. It strikes

me that a better prescription is for imagination, flexibility, and vision. We are not going to live in a surprise-free environment, and there is no chance that others will subscribe to our preferences for stability

and consistency when those words are equated with a $2 trillion national economy going for the third and fourth trillion. The limits to growth do not lie in resource constraints but in the world of rising

expectations and the function of surprise in the play of rogue forces

that will not hesitate to test and stress an overloaded and

unresponding Western system.

If our political technology is to learn how to manage surprise,

it will have to shed many of its historical prejudices and created new

capacities for assessing the sources and the meanings of the

turmoil of the 80s. It will have to convert the stale routines of diplomacy to a new science of negotiation and bargaining. And to support all this, we will need a public consensual process built on

the understanding of the inherent instability of our position, a process that is more straight-line than we have been used to; a

policy process that is not traumatized by surprise when it comes; a

process that is not intimidated by the selfasserted authority of the

media; and, finally, a political technology that never takes its eyes

off the time constants. A process, if you please, with a thick skin. To imagine the texture of science in the next decade, when

the NBS will be ninety, I think we must first locate its place in the

record of the 3 postwar decades. What happened then was that American science was first idealized, then politicized, then

internationalized, and finally secularized. Science hung on to its first principles, even so. But is was a heady passage and a narrow one, and the sides of the vessel inevitably were scraped and scarred.

Bush's vision of a sweet social contract under which scholarship,

learning, and discovery would advance with independence along

with a type of federal support that would be condition-free, proved

to be a fragile vision. Science indeed advanced, at a pace and with a variety that deserves to be celebrated, honoring both itself and

the national policy that made it possible. My friend Jean Mayer

identifies no fewer than four great postwar "revolutions" based on

science or technology: releasing the energy of the atom; man's

escape from earth's gravitation; multiplication of the powers of the

brain through computers; and seizing control of evolution through

genetics. But these achievements quickly and progressively brought

government and politics into the life of science, even as it drew

science ever more closely into the web of government, and from

there into social controversy. With scale came dependence on

government, and dependence led to oversight and accountability.

So, as science prospered its environment changed. We have

come now to the fourth postwar decade, to the economics of constraint, a lively appreciation of risk, the politics of tension, the

22
dilemmas of ethical responsibility, and to brimming possibilities for the humane uses of science.

How will America's science treat humanity in the 80s?

Today, the U.S. has 6 percent of the world's population. Twenty

years from now, it will have only 4 percent. If we accept, for example, that we are now in an exponential phase of biotechnology,

what will we do with it and what will be the ends to which our knowledge will be put? The high likelihood exists that within a couple of years biotechnology will produce a vaccine for hepatitis, a

disease that impacts 50 percent of the people in developing

countries. I have heard it said that this works out to afflicting 500

million Chinese for the 2-year duration of Hepatitis-B, an effect that adds up to social costs almost beyond calculating. The approaching

opportunities through biotechnology to attack the pestilences that harass the lesser developed countries are enormous, and it means

that our scientific promise can be a very high card in American

diplomacy, and a new avenue for outreach and reconciliation. But at the same time, biotechnology has potential military applications,

especially by letting loose pathogens which have been pacified by

evolution, to attack targeted strains of agricultural crops—in other

words, biotechnology can scale up the feasibility of using starvation as an ultimate offensive weapon. Thus, science brings both light

and shadow to the future. So ours is a decade of contradictions. When so much could

happen from the first postwar decades to the threshold of a fourth,

then what lies ahead for the fifth and the sixth? I think it depends on how America looks out on the world, how it defines its responsibilities and goals—how, if you will, it answers Huxley's

questions. In all this, science must not be passive, willing to march

without asking or caring what road it marches on. My own concern

for the decade is that confusion of purposes may be overtaken by

ideology and dogmatism, which are what confusion tends to breed.

And if science ever has to stand and fight, ideology is its natural enemy.

My hope is that, in the 80's, science will land on its feet and

decide its own identity. Through one lens we see science and

technology as cogs in the production economy. Through another,

we see them honing the edges of military technology. From a third window, they are high cards in global diplomacy. And a fourth

representation brings us back to science as a frontier of wonder and

discovery, a continuum over the reaches of time. How do we deal

with this multiple persona? Can a distinctively American policy for science be found that does justice to this versatility, to a process

and a structure that is at once political and apolitical, at once

anchored to government and yet a buffer against government, at once an expression of national purposes and a bridge across the

mean differences of national ideologies? If such a policy will ever come to be, science itself must think it out. Science's hopes and fortunes will go well or badly as government and society go. It is, unfortunately, not the other way

23
round. But there is this, also to be said: Science has a conscience

that is shaped by its accumulated insights into the relationship

between man and the universe, a conscience that draws from

prehistory and looks ahead beyond the human scale of time.

Science knows very well, for example, that ours has not been a

pretty century. Its quality is etched in the repeated violence that man has inflicted on his brothers. For that, the conscience of science has reasons to be troubled, for science is writ large in the

chronicle of our century. And for the 80s, I would like to look to the

conscience of science to keep alive a reverence for life, for the

human struggle, and for the wonder that is also part of our shared

experience. If you hope I will say that I see years of achievement

and a growing American love for knowledge through science, I will

tell you that it is probable, but not sufficient. Science is bound to be

fiercely concerned with the right uses of knowledge, fiercely

independent in championing them, and fiercely honest with itself

because as a reflective friend of mine would say, though science

has not yet made the good society, it has caught an unforgettable

glimpse of it. Discussion

Q. I was very much moved by your speech, especially with

reference to what is left over from the holocaust and to science's

social concerns. I wonder if you have an opinion as to whether

science would be able to devise a means of preventing such

violence again. A. I would say that if science, viewed as an interdisciplinary

process, were given the chance it could do a great deal. I look, for example, at the potential of science. Today we do not seem to make our decisions about the uses of science, or the areas of investment in science, in terms of potential: lost potential, unused

potential, open capacity. I look at the possibilities and the potential

of space science and technology where I think that the opportunities

exist in satellite technology linked to communication and information

could bring a great deal to a rational world order, much more

indeed, than equivalent expenditures to improve the edge of our

military superiority. Yes, I believe that science with technology could

do a great deal if it were given the chance and if we chose to go

that way.

Q. Mr. Carey, we are rapidly gaining the ability to transmit a tremendous amount of harmful misinformation throughout the

society. With the functional literacy and other communication

problems of the upcoming younger generations, who may be

technologically quite sophisticated but unable to communicate with

simple sentences and spell properly, are you optimistic or pessimistic about our ability to cope with this crisis? A. Well, I think you are dealing with an example of neglect

and decay in an otherwise very prosperous society. I think that the

24
young people certainly know more about more than we did in our

time. I think that there is a qualitative difference in that what we

thought we knew, we held on to, we considered, we digested, and

we retained. Today's kids, as I see it, catch information on the wing.

There is not time, no leisure, no spacing in which to digest, reflect, and interpret. If the education system in this country is going to be

allowed to go downhill, to become third- or fourth-rate, when

everywhere else in the world, except in the third world, it is given

pre-eminent importance, I think this is one of the great tragedies of contemporary times in this country. The value of learning is well understood in other societies that operate differently from ours. I see no sense, whatsoever, of national priority being directed toward

the quality of education, the quality of learning. All the national

priorities seem to be addressed to the production side of our economy and to military prowess, and something very important is being lost. I do not think at all that the present state of semi-illiteracy

in many areas is irreversible. And in our small way at AAAS we are

trying to do something about this, as you know, with a magazine

called Science 81 . We are getting on the radio, we are trying to develop a critical function relative to the performance of the

media—it is a tough business. I do not think that scientists can

stand aside and simply passively watch these malfunctions settle

into our system. That is why I said what I did, that science in the

80's must not be passive and it has got to know when it is time to

fight back.

Q. Mr. Carey, the trend technologically speaking with regard

to the LDCs, is for the rich to continue to get richer and the poor to get poorer, and with our budget cuts in aid, for example, we are

certainly not reversing that trend. Can you think of two or three

general ways one might work on reversing that trend?

A. Well, when a country that is rich and spoiled has to make choices, as its leadership defines those choices, it can either

bring about a greater understanding relative to the third world, or it can lead us to recede in those areas. I ride a bus home from

downtown, and on the way home last night I happened to be

reading the Johns Hopkins Alumni Magazine. I came across an item

relative to the research they are doing on Vitamin A. It was a report

of a finding that for a particular destructive malady that effects hundreds of thousands of people in the tropical areas, a 2 cent oral dose of Vitamin A followed by two more doses at 2 cents each

would reverse the impact of that disease and put hundreds of thousands, if not millions, of people who suffer that tropical disease on a path to a comparatively healthy and decent life. Well, 6 cents

per person, if there are 500,000 people out there, sounds like about

$30,000. I have a feeling that there is a great deal that we can do

through science at the micro level, while we hope and use whatever

influence we have as scientists to alter the macro scale or priorities. Let's get the Vitamin A out there. Thank you all very much.

25
Dr. Arthur M. Bueche* is General Electric's principal

technical officer and a member of the company's Corporate Policy

Board. He received a B.S. degree in 1943 from the University of Michigan and a Ph.D. in 1947 from Cornell University, where he

served as a research associate until joining the General Electric Research Laboratory in 1950. He held a number of technical and

managerial positions prior to his appointment as vice president for research and development in 1965. He assumed his present

position in 1978.

A key spokesman for the technical community, Dr. Bueche

served in President Reagan's transition organization as head of the

Science and Technology Policy Team, Office of Policy Coordination.

He was a consultant to the Department of Commerce in its recent Domestic Policy Review of Industrial Innovation.

Dr. Bueche is a member of the Executive Committee of the

Council of the National Academy of Engineering and of the

Academy Forum Advisory Committee of the National Academy of Sciences. He is past president of the Industrial Research Institute and present chairman of its Federal Science & Technology

Committee, past chairman of the Gordon Research Conferences,

and past chairman of The Metal Properties Council. He holds or has

held many other positions of leadership for the American Chemical

Society, American Physical Society, and the American Institute of Physics.

* Dr. Bueche died on October 22, 1981. 26
Government-Industry

Relationships in the 1980s

m f I could sing, which I cannot, I would invite you to join in a I) rousing chorus of "Happy Birthday, NBS." But I can wish

Wr you many happy returns on your 80th anniversary and thank

W you, most sincerely, for inviting me to share in this celebration.

The year 1901 was quite a year . . . although, any rumors

to the contrary, I do not speak from personal experience. It was the

year when the most quoted comment out of Washington was, "Speak softly and carry a big stick." It was the year the Victorian Era ended. The first Nobel Prizes were awarded, although not for instant coffee, the electric vacuum cleaner, Mercedes cars, mercury

lights, or Quaker Oats, all of which were introduced during "ought- one." The favorite song of 1901 was "I Love You Truly." But I will not sing that, either, even though I do have the very highest regard

for the National Bureau of Standards.

I have been privileged to work closely with the NBS for many

years, there are many good friends in this room, and I like to consider myself a great booster of the fine work the National Bureau

of Standards performs for our nation's government, for its industry,

and for its people. I congratulate you, one and all. As noted, I do not intend to sing. Nor do I intend to deliver a

sermon. But I do have a "text" for today's message, and to get it I had to go back not 80 years, to 1901, but 100 years—exactly 100

years—to 1881 and the writings of a still-in-the-news scientist- philosopher named Charles Darwin.

Darwin wrote: "The plough is one of the most ancient and

most valuable of man's inventions; but long before he existed, the

land was in fact regularly ploughed, and still continues to be

ploughed, by earthworms. It may be doubted whether there are many other animals which have played so important a part in the

history of the world as have these lowly organized creatures." Darwin was not alone in noting the importance of earthworms. Nor was he the first. Cleopatra was so impressed by

the work of earthworms in creating the fertility of the Nile valley that she decreed the earthworm to be a sacred animal to be revered and

27
protected by all her subjects. Later, a French researcher named

Andre Voisin went so far as to say that civilization itself could not have developed without the earthworm's help.

Now I am not about to stand here and try to describe to you,

in clinical detail, what it is that earthworms do to make themselves

so effective, or so numerous. But let us just say that they are

untiring contributors to fertile soil and extremely efficient converters

of organic wastes into valuable resources. One agricultural expert

has shown that earthworms in poor soil can boost the yield of herbal

plants by more than 10 times. Worms control pH; they transport

minerals and nutrients from beneath the soil up to where they can

help plants grow; they improve the composition of the soil; they can

increase the rate at which soil can absorb water by 3 or 4 times.

You may properly wonder, along about now, just why a speaker whose assigned subject is "government-industry relations"

is devoting all this attention to what some people would classify

among God's lowliest creatures. But I beg you to be patient. The worm will eventually turn ... to the subject.

Earthworms, my friends, might well become a big business;

and as a large industry they surely will invite the attention of government.

Any entrepreneur looking at earthworms should be

impressed by these statistics: Americans produce well over 100

million tons of residential and commercial trash each year—and two

billion tons of agricultural by-products. As one of the nation's

leading experts on earthworms, Steven Bridgens, puts it, "If earthworms were allowed to turn the organic part of these 'wastes'

into valuable castings (that's the polite word for what earthworms

leave behind), the stress on America's already overburdened solid- waste disposal system would greatly ease." Bridgens goes on, "By mixing organic wastes from human

consumption with sewer sludge and animal manure, the earthworms

can really get down to work. In one California experiment, 18,400

pounds of biodegradable refuse, composed of materials ranging

from phone books to grass clippings, was 50 percent consumed in 38 days and 80 percent consumed in 68 days."

Meanwhile, a lot of people are considering earthworms as a source of food. Dried earthworms consist of up to 72 percent

protein by weight. Nutritionally, earthworm-burgers would probably

be far superior in many respects to beef—or even peanut butter. It has even been reported that several newspapers have held contests for recipes using earthworms.

And, if this does not appeal to you, you can still use them to catch fish, which is why they were called angleworms in the first place.

Presently, this nation has some 100,000 earthworm ranches,

many of them quite profitable. But this is only the beginning. Many

people see the growing of earthworms, for animal (and maybe even

28
human) food, and for applications in the processing of waste

products, as a potentially major business.

Well, up to now, I have been dealing in fact. Let us now turn our imaginations loose and try to envision what might happen when

earthworms blossom into a highly competitive multi-billion-dollar-a- year industry.

The first thing that will happen when it becomes apparent

that earthworms have such great commercial value is that someone

will figure out how to tax them. Depreciation schedules are likely to be quite slippery, and a large number of research contracts will probably be necessary to establish the required classifications. Truth-in-labeling will obviously be a problem; in fact, it may

be difficult to label the product at all. Import and export regulations

will have to be established, and as American genius learns more

about earthworm science we surely will have to devise some new

rules regarding the export of earthworm technology and know-how.

The movement of earthworms across state lines, especially

burrowing for reproductive purposes, could have serious

ramifications. As it is recognized that earthworms have great

environmental value, it will surely be necessary to place limitations on their wasteful use in recreational, as opposed to commercial,

fishing. This, in turn, would be a blow to the nation's eager, young

entrepreneurs who would thus demand, and receive, some kind of road-stand subsidy.

I should not be surprised if you folks in the National Bureau

of Standards are asked by a Congressional committee to determine

the optimum length and girth for all 1,800 of the presently

recognized species of terrestrial worms of the class Oligochaeta.

We may have to consider import quotas on such competitive

threats as the Australian species of earthworm that can grow as

long as 1 1 feet. The licensing of compost-bins can be expected to become increasingly complex, as will the required environmental

impact statement for large-scale systems for handling commercial

wastes. It may take years to work out the necessary compromises

among the various special interest groups that might be impacted by

a Pure Food and Worm Act. But the truly serious technological and environmental crisis of the future can be expected to come after the tremendous value

of earthworms has been demonstrated . . . and after the major

threat to this invaluable natural resource starts getting full media

attention. It is bound to become Public Issue #1, and the rallying

point for movie and rock stars you have not even heard of yet. This major threat, of course is the vast expanse of concrete,

tarmac, and other artificial surfaces placed across the nation in the

interests of various kinds of transportation and recreation. Every

inch of the nation's vast highway system, every landing strip, every

parking lot, every sidewalk, every tennis court, every

driveway ... the inexorable march of concrete-laying and the

29
related paving technologies across the face of the nation ... all of these have created a literal deathtrap for our invaluable

earthworms. Every night, millions—perhaps billions—are killed by

the lethal tread of vehicle tires and the careless tramping of feet. After rainstorms, the carnage is even more disastrous.

When the potential seriousness of the Earthworm Crisis is first made clear, Congress will surely entertain ideas for installing

permanent spray systems along the edge of all streets, highways,

and runways, so that a regularly timed flood of water can gently

wash errant earthworms back to welcoming soil. However, a series

of ever-larger pilot plant and full-scale studies will surely show that such an approach, while effective for the earthworms—and helpful

in creating new wetlands to protect—causes other national

problems, such as metropolitan drought and catastrophic national

debt.

So we can imagine that a simpler system will be enacted by

law: the drilling of worm-relief holes at appropriate intervals in all major expanses of hard-surface areas from coast-to-coast. The size

and spacing of these holes may well become a major campaign

issue, splitting even those political segments which are otherwise

the most cohesive. Obviously, there will be charges that big, fat worms are being protected at the expense of the billions of thinner

and more needy species.

An EPA—that is an Earthworm Protection Agency—could

well become one of the largest of government bureaucracies,

especially with the need for literally thousands of full-time inspectors

policing their respective national districts to make certain that

states, communities, and private property owners, if any, are keeping their worm-relief holes unplugged and passable.

Initially, the cost of all this will be borne, according to some

early estimates at least, by a wormfall profits tax on a certain group

of entrepreneurial companies that have managed to corner the

market on those 1

1 -foot-long worms from Australia. But eventually,

in an inevitable new cycle of national politics, we can expect a new

leader to come along and suggest that the nation is spending too much on things like earthworm protection, that the earthworm

business might do at least as well without the requirements for labeling the product, and that maybe something ought to be done. I can hear it now: "It's time to get the government off the

earthworm's back!"

Well, when that happens, I am sure the new leadership is going to augment its wisdom by undertaking the cutbacks and the new approaches and the simplification of rules only after reviewing

all the good advice it can get from people who know something

about the earthworm business.

And what, at long last, after this lengthy flight-of-fancy about

worms, is the moral of this story? As we seek a new era of understanding about technological relationships—technological

relationships between government and industry—and between

30
government, industry, and the universities, too—it is obviously of very great importance to have the best possible advice for the

people who must call the shots.

And this, of course, is why so many of us who have been

asked to consult with the new administration have stressed the

need for a top-notch President's Science and Technology Adviser.

We believe the role of the Science and Technology Adviser is not

to be an advocate for science and technology—not if by "advocate"

you mean someone representing a specialized constituency in its desire to obtain a larger share of the budget for research and

development. We do believe that the Adviser should provide a

critical area of expertise, and objective judgment, in helping the hard

trade-offs that must be made.

We think a strong Science and Technology Adviser can help

avoid surprises that come from lack of awareness of the facts—and

of emerging issues—and we believe he can do a great deal to help

identify opportunities for using science and technology to solve the

nation's problems, and achieve its goals. Just take a look at the challenges facing the new

administration—facing all of us. We want higher productivity,

increased employment, reduced inflation, greater competitiveness in world markets. We want to cut the costs of government. We want

sensible environmental protection. We want opportunities for young

people and improved health for all citizens. Above all, we want to make sure of our national security so we have the option to work

toward those other goals.

Attaining every single one of those objectives is dependent,

highly dependent—on technological leadership. Putting new vigor

into American science and technology is essential to the health and

well-being of our people, to our national security, and to our economic survival. Technology is a tool ... the best tool we have for achieving many of our national goals.

Knowing what technology can do—and what it cannot do—is certainly a key factor in making a lot of the big decisions necessary

for cutting unnecessary government expense, for determining the

necessary tradeoffs, for helping set the priorities.

I am sure we all agree that cuts should be made by people

who understand what they are cutting. And I am sure we all agree

that we ought to reduce many of the suffocating regulations that have grown like barnacles on our social system over recent years . . . and that changing or reducing these regulations ought

to be done by people having not only some firsthand knowledge

about what the regulation was originally intended to do but also

about the scientific data-base—and measurement capabilities—for making them practical.

As for cost-cutting, I believe having high-level technical

advice is quite in keeping with the desire to achieve a balanced

budget. I think a sure way to reduce the costs of government is

31
through the two-pronged approach of providing better management

of government-sponsored science and technology, plus greater

reliance on a private-sector freed from some of the obstacles that have kept it from doing what it can do best. For both parts of this job, those of us who have been

studying and advising in this area are therefore in agreement that the President needs a strong science adviser, a person he can trust to help provide leadership as well as advice.

The technological strengths available to the President from

within the government include diverse contributions from many

departments and agencies, not the least of them right here, the

National Bureau of Standards. These strengths include also the

wealth of engineering and science strengths of private industry and

the universities. The President surely will benefit from having a close

adviser who can secure, coordinate, consolidate, and interpret the

scientific and engineering impacts from the many sources. The short- and long-term health of engineering and science,

and their rates of development, are vital to the quality of these many

impacts. The Science and Technology Adviser must be responsible

broadly to advise the President on the state of this health, and to help him maximize it through many forms of governmental support, not just financial aid but legislative and regulatory as well. And, I might add, through moral support!

The Adviser should represent the President in many science

and engineering activities within the government, to private industry,

and to the universities, both here and abroad. The President's

Science and Technology Adviser should be especially alert to the

progress of science and engineering to inform the President of the

promise and implications of advancements in these fields. He also

should monitor the quality and quantity of the nation's technological

manpower and physical resources. That is a lengthy list of assignments, and, I firmly believe, a

list of essential tasks to be accomplished.

Good advice on technology, at high levels, will be helpful to the maintenance of those government-sponsored laboratories, like the National Bureau of Standards, that have proved their worth over

the years.Good advice on technology, at high levels, is also important

to those of us in industry looking toward the improvement of government-industry relationships in the 80s.

It is the consensus of virtually every "study group" and Task

Force I have been associated with in recent years and months that the private sector of our economy needs to be encouraged to increase its innovative activities . . . and that this growth must

occur throughout the entire chain leading from basic research in the

laboratory to products and services for the marketplace.

Let me touch on three general opportunities for government

to provide help and encouragement to private institutions seeking to share a larger part of the nation's technical job:

32
First, properly balanced tax structures: Second, sensible regulation:

And finally, an overall attitude that emphasizes cooperation

rather than adversarial confrontation.

Without presuming to provide specific prescriptions in each

of these areas, I would like to spend just a few minutes describing

some of the issues involved.

Sensible modifications in federal tax codes that would

encourage innovation and private investment in R&D include, for example:

a. Providing for faster depreciation of facilities and equipment. The development and diffusion of new technology in the manufacturing sector is vitally dependent on new investment in more

modern facilities, and this change would help

speed up the process.

b. Allowing flexibility in write-off periods for research-related facilities and equipment, as well as externally-acquired technology. Such assets

are critical to maintaining a forefront research

effort,—and to efficient utilization of technology—

and they may become obsolete very quickly.

c. Providing business—and maybe even

individuals—with greater incentives for contributing to university science and engineering

programs. We have critical shortages of certain

types of trained scientists and engineers.

Faculties in these fields are being drained. And

we need to stimulate closer collaboration

between industry and universities. These modifications are not suggested only as encouragement to large institutions with large laboratories, of course. Significant attention also needs to be directed toward

federal tax policies that will recognize the special problems of small

technology-based businesses ... the special problems of

attracting equity capital.

Whether discussing small businesses or large, we are

constantly reminded about the importance of the attitudes of government policy-makers. It is absolutely essential for these key

people to understand the true effects of their decisions—or indecisions—on the economy, on business management, and thus on the health of the nation's leadership position in science and

technology.

Now what about regulations?

Frankly, this anniversary celebration here today does not seem like quite the appropriate time to open the Pandora's box of government regulation . . . regulation for safety, health, and

environmental protection. So, let us just take a quick peek inside. 33
The issue here is not the need tor regulation. I think we will

all agree: protecting public health and safety is an obvious job for government.

However, discussions of the details of regulation invariably

become exercises in frustration. As one of my colleagues has put it, "Nothing is more frustrating than a traffic light that says 'stop' more

than it says 'go'." Besides urging new attitudes for cooperation and respect

between the regulators and those being regulated, the most cogent

advice that technologists seem to have for regulators is this: in all areas of regulation, a priority for government must be the

independent establishing—and assuring the use of

adequate

scientific baseline data for decision-making. One way to say this is that federal regulators ought to be making better use of the skills and experience of the National Bureau of Standards.

Other suggestions in this area include improving the

methods of estimating costs, benefits, and risks in comparing

alternative choices for proposed regulations; better coordination

where different agencies have responsibility over similar areas; applying "performance standards" rather than "specifications" to allow those being regulated greater freedom in determining the

optimum technical approach; and using economic incentives to encourage innovation.

Earlier I commented that one way for the government to help achieve and maintain the technical strength it so urgently

needs would be through the adoption of "an overall attitude that emphasizes cooperation rather than adversarial confrontation."

This just may be the most important point of all . . . and it may be the change we have the best opportunity to make during

this period of national introspection and new directions.

"Cooperation instead of confrontation" is a challenge for all of us as individuals ... as representatives of our own

organizations, public or private ... as practitioners of our own

professions ... as citizens. Let me put it just as plainly as I can. This nation's

government and this nation's private institutions do not have

different basic goals. We all recognize that our country has

problems. We certainly cannot afford to waste time or energy

arguing about whether these problems ought to be solved. And,

above all else, everybody involved has got to wake up to the reality that we are all on the same side. On balance, science and technology have contributed

immeasurably to the health and happiness of humankind in the past.

If we all work together, they can certainly do so in the future. New ideas, science, invention, technological skill . . . these

are prime national assets to be treasured, protected, and—above

all—used for the common good.

And beyond the apparent, tangible benefits to be gained

from revitalizing scientific research and its applications, new

34
emphasis on technological leadership can provide an urgently

needed lift for the national spirit. Just as it was 200 years ago when the nation was

founded . . . just as it was at the turn of a great new century when

this Bureau was founded . . . America's destiny can still be one of pioneering example, of willingness to explore frontiers with faith instead of fear, of dedication to helping show people everywhere

how individual human skills, given freedom to achieve, can make life for so many so much more worth living. In short, my friends, there is very little wrong with this country that good new ideas, hard work, respect for the past,

cooperation, and confidence in the future cannot fix. As for the role of science and technology in all of this, I will probably never be able to squirm my way out of the earthworm

allegory with which I started these comments, so I will close them

simply by saying that a lot of digging—night and day—can be a very

good thing, as long as those who are digging leave behind

something that is useful to others.

Discussion

Q. There were rumors coming out of the White House that the Science Adviser's position might be moved from the White

House staff, and I believe that the New York Times quoted you

directly as calling that inconceivable. Is there any further word on

the likelihood of that happening?

A. I do not really know what is going on, frankly. I escaped

on January 20th and I have only been in telephone contact with

people since thorr; The rumor I have had is that the whole White

House ?wtf situation is being reevaluated. Whether or not that is true, I do not know. I do know that most of the technically based

positions in the government have not been filled. Just look across

the departments and agencies; we do not have people in those. It could well be, and I have been told that this is so, that the whole

manpower selection and approval process in the White House is now so bogged down that it is difficult to get anything through. I hope they do not downgrade the Office of Science and Technology

Policy because as I said in the talk I think it is absolutely essential. I also think that the President and his staff recognize this. You know

the budget for OSTP is $4 million and any person worth his salt can show them how to save $400 million in the first week and do it in such a way that it will make sense to most of the people who look

at the way you save money. And $400 million is just the beginning.

You could probably do that in two days if you know anything about

what is going on. Q. Could you say a few things about long-term research?

The tendency of private industry in recent years is for short-term

35
research and a quicker return. Could you say what the role of government in terms of tax incentives would be to help rectify this? A. First, I agree that there has been this trend in a good

number of companies. Industry has really been strapped for good

investment opportunities that it thinks it can get a good rate of return from. That rate of return is made very dubious by our high

inflation rate, and of course, also by our high interest rates. These

high interest rates make people look for quick payoff things,

because if they have to borrow money to do any of these things, it is horribly expensive. They do not want to borrow it for very long,

they want to get their money back out again under these conditions.

I think the proposals that Mr. Reagan and his administration

have are a step in the right direction. They are going to try to reduce

inflation, they are going to cut government expenditures which is one piece of it, presumably, if you believe the theory under which

they are operating. They are going to reduce taxes which will presumably increase savings and make more investment money

available, and at the same time, increase consumption of goods and

services by Americans and hence stimulate production and make

more jobs. I hope that all works. I happen to believe it will, although

economic theory is not my strong suit, and I gather from what I have

read, hardly anybody's strong suit. So, I think they are making steps

in the right direction. I think the intent of at least streamlining the

regulatory process is an important one because there is an awful lot of very good R&D work going on in industry which, in terms of goods to export or services and goods to people in the United

States, is just not productive, it is there to fix up something, or to make sure that the regulator does not crawl down your throat. I am

happy to see that regulations will be streamlined. There will be more

emphasis on cost benefit analysis and I think thai k& awfully

important.

I am not one who thinks that there should be a special \a«

incentive for donations by industry or by private individuals to

universities. I think that most private individuals, and certainly most

responsible industries, if they have the money, and if they really

understood the problems of the universities, which many do, would

increase their contributions. Contributions come in many forms:

sponsoring programs, endowing professorship chairs, hiring faculty

and students for the summer, donating equipment—all sorts of

things. A tax action to stimulate that probably is not the thing to do

at this moment. I think if you get everything healthy and going, the

universities will prosper. Government can help, too. During the transition period, I had

an opportunity to look at what government laboratories do—and we

did not look at the Bureau of Standards, so there is nothing

personal in this. But we did look at the Department of Energy

laboratories and asked what is it that they do that might better be

done in universities or in private industry. If you do it in universities,

you do that work and at the same time train students and provide

36
equipment for the university. If you do it in industry then you can

worry less about technology transfer. A good number of the government laboratories with which I am familiar are now asking, "How can we transfer our technology to industry?" Well, the simple answer would be to send all the people

to industry. If the government wants to spend that money, spend it in industry and then you will have transferred that technology to someone who can utilize it and follow-up on it. I think we could do

an awful lot to help the universities, to lengthen our perspective on

research, if we actually do more of the things that might better be

done in the universities rather than doing them in government

laboratories.

You got me on my soap box on that one. If there are more

questions or comments I will try to be a little more brief. Q. I know that Proctor and Gamble has a scientist here in Washington who has a title like Associate Director for Company/Government Cooperation. Do other companies have

scientists like this? A. I do not know. Proctor and Gamble, you must realize, is a rather special company. I do not think I would be wrong in describing them as pretty much consumer-oriented and having very

little interaction with the government in terms of taking government

money to do things such as R&D. They and other companies, for example, Monsanto, Merck, drug companies, chemical companies,

and so on, do have a lot of people in Washington whose job it is to get to know the regulators. These people try to anticipate what the

regulators are thinking and try to help them and if they have

questions, to feed them information. So, I do not know of exactly a

parallel position, but I suspect there are people in almost all companies who p^urm that function.

Tboie is another set of companies that are both in the

strk,uy commercial, consumer type businesses, and at the same

time, in defense and space related businesses, energy projects, and

so on, such as the one for which I work. There we have lots of people in Washington, trying not only to get government/ industry

cooperation, but a good number of these people are trying to get

government money to fund that cooperation. That works pretty well,

by the way. I think the DOD has had a marvelous record for getting

the help of industry in planning early in the project, and carrying

things out to where the DOD can use them. There are all sorts of these.

Q. One of the things that has been reported is that many

technical organizations are now being led by people who do not themselves have a technical background, and who are, therefore,

less inclined to put new technology into their product. Would you

care to comment upon that? A. It was alleged that many corporations are now being led by people who do not have strong technological backgrounds and,

hence, are hesitant to invest in the development and marketing of 37
high-technology products. I guess it is only partly true. I can think of industries where, much to my disgust, rather than spending the

money to modernize their factories and bring in new techniques, or come out with new high-technology products, they increase the

dividends to the share owners. And I think for a business that is short on money, that is not a very good way to operate. On the

other hand, I look at General Electric, and I am a great admirer of Mr. Jones, our leader, who is a financial type. He is the strongest

friend science and technology ever had in General Electric. He

believes in it. Even during the 1974-1975 downturn he saw that the

advanced technical work grew rather than cut it like a lot of other

things. So it is a highly personal thing, I think it is a highly variable

thing.

If you want to make a point with at least some of these

businessmen, you should draw their attention to exports. If you look

at the U.S. exports, it is a collection of high-technology products,

including wheat and corn. Agriculture is certainly a high-technology

occupation today. Without the fertilizers and the modern machinery,

our productivity would be very low and we would not be exporting

grain to feed the rest of the world. But if you look at the other

things—airplanes, jet engines, nuclear power plants, steam turbines,

gas turbines, electronic gear, computers, drugs—these things that we do export are all high-technology products. My personal

experience would be that if your product is equal to the product in country X to which you hope to export, you had better forget it, because they will keep you out of that market just as much as they

can. The only way they are going to buy your stuff and provide jobs

and profits to the United States, is it our products are better and

unique, and they cannot be obtained at anywhere near the price in those countries that they can be obtained from the United States. You just have to have exports and I think that is a powerful

argument for most of these businesses.

Q. Since you mentioned DOD, the figures that seem to be

coming out on support for basic research show that government

funding will be shifting more toward defense related problems and

away from civilian sector problems. Could you comment on the

importance of that trend in light of the comments you made about

the need for innovation and increases in productivity. A. I do not see anything wrong with it, in fact, I think that there are some very interesting possibilities. I am aware of a number

of programs which already have been funded by the DOD that are aimed directly at increasing productivity. There is a big computerized

"Factory of the Future" program that DOD is supporting and I think

is just marvelous. It goes all the way from information handling and

software, the kinds of things you think of in connection with

computers, to new machining methods and new ways of forming

metals and plastics, to new ways of inspection and insuring higher

quality. It goes through the whole cycle. That is an example of something, which, once it starts out because of DOD fiat, is going to

38
spread throughout American industry and will increase productivity

and stimulate innovation, i think you only have to look at some of the things that happened after World War II where, because of forced draft by DOD, American industry did a lot of things. But the

most important thing it did was increase its technological base, with

the help of universities, with the help of the Bureau of Standards,

with the help of a lot of people. It sucked more out of the literature and science efforts that had gone on years before than it had in quite awhile. And after that, then you begin to get the widespread

use of computers, modern electronics, test gear, you name it. I think

it is not bad. I really am a believer in what they call the "trickle" down theory of technology. If you start someplace, it will spread out as time goes on, particularly if they have the money with which to

invest, and hopefully, the tax changes will make that available.

Q. General Electric is one of the most well known names in American industry, but I am surprised at the number of products by

G.E. which have their origin in some other country. Now I am

wondering if all of American industry gets these favorable tax breaks, will that money in turn be applied to R&D in some other

country such that our balance of payments will not be any better off than they are now?

A. I do not know, of course. I guess that a prime example of forcing R&D overseas is in an industry with which I am not all that

familiar, because I am not directly involved but have heard a lot of people talk about it, and that is the drug industry. It is apparently

much easier to develop and test new drugs in other countries than it is in the U.S. As a result, the citizens of those countries have new

drugs available much earlier than we have in the United States. As

somebody said, if you have ailment X for heavens sake do not get it here, go to Germany or France or someplace else to get it, they will cure you in a hurry. Now of course, that is probably overstating. I do

not see a major thrust to do R&D outside the United States just

because one has more money.

Where you do R&D has been looked at by a lot of people,

and the answer to that question is dependent on a lot of factors. Hi&t, it

i S dependent on the extent of the activities overseas. For

instance, it have a sales office in Germany to sell products, we

are certainly not goiny w niJt R&D there because the information

ftew is just too difficult. We would riav^ r«^K^ ~y«^ — the ocean, interacting with the engineers and scientists on this siuc

by the way, ft used to be cheaper to do the work over there and now it is not, it is cheaper to do it here. If you had a large factory,

however, that was making things that resembled pretty much the

things that you also made in the United States, then you could very

well have, let us call it a strong engineering function there, that would help redesign the models to take advantage of local preferences and local materials and methods. This happens in some industries but does not really detract from what you do in the

United States because most of the early work is done in the States.

39
You would not have that market at all if you did not do the

engineering work over there to adapt the product to local customs

and needs.

There is a second reason why you might do work overseas, and that is where the governments insist on it—and we are seeing a

lot of that now. They are saying that if you are going to sell stuff in our country, then you are going to do some of the R&D in our

country, and they make it pretty sticky if you do not. Our good

neighbor to the north is pretty much in that direction, Brazil is heading in that direction, and I am not sure if I am up to date on Mexico or not, but if they are not, they will in the near future because they are training technical people. They understand the

importance of starting out with R&D to develop high technology

businesses, innovations that lead to high-technology businesses,

and they want a piece of that pie as their countries become more

sophisticated and as they grow. So, we are seeing a lot of that. Where you do R&D is a complicated question. If you just make the

decision on a financial basis, and you are a United States based

company with history in the United States, you will do almost all of it in the United States, but there are some other circumstances to be

considered.

Q. In the government/industry relationships, we seem to have a growing new emphasis on the military. Unfortunately, the

government relationship with the military in research and technology

has not been noted as being the most efficient place to do that sort

of thing. Can you say anything about the new—administration—are they coming up with any more efficient management techniques, or so forth, from the government that would more effectively utilize these people? Otherwise, it appears that we are drawing away from

the private sector the very research and technology that we need to increase productivity in the United States?

A. I really do not know what DOD has in mind for the

efficiency of doing R&D or productivity, if you will. The President

pointed out yesterday, that Weinberger used to have a nickname

that made him feel pretty secure in his insisting on higher

productivity and cutting waste—it was "Cap the Knife" I think. I not sure it is all so bad. I know there are an awful lot of h^aucratic

delays sometimes in procurement and thinqs^* ***** sort> but from

what I have found i- <,-..<*rany, the technical people are

r^crtit, they are very dedicated, they work hard, and try to do things just as efficiently and of as high a quality as po^fDle—and

you are no exception here. True, you have some bureaucratic

delays, whether you are in private industry or government, or

universities, where they tell me, it is still worse. But I am not

disturbed because the DOD will have more R&D money. Being an

optimist, if I were in a university or industry that relies on government money for a certain number of its activities, I would go where

the money is. I would be plowing DOD today, tomorrow and forever

until things changed and my friends in universities are doing that. 40
Let me just say in closing, that I think this a great institution.

It is 80 years old, but it has really established a wonderful

reputation. I used to have a vision for this institution as being the

corporate research laboratory for the federal government. And to a

certain extent I think it is. It has good people; hopefully it will continue to have good people. I understand your equipment

situation is better than it has ever been. I know your management is good. I know you have a lot of supporters out there in industry, and I just want to wish you Happy Birthday and many happy returns.

41
Dr. Arno A. Penzias is executive director of the Research,

Communications Sciences Division at Bell Laboratories, which is responsible for electronics, computer systems, guided-wave, and

radio research. He joined Bell Laboratories in 1961 where he has

also served as head of radio physics research and director of the

Radio Research Laboratory.

In 1978, Dr. Penzias and Robert Wilson, another Bell Labs

research scientist, shared the Nobel Prize in Physics for their 1964

discovery of evidence to support the big-bang theory of the origin of the universe.

Dr. Penzias received his B.S. from the City College of New

York and M.S. and Ph.D. degrees from Columbia University. He has

received a number of honorary degrees and is the only American to hold the degree of Docteur Honoris Causa from the Observatoire de

Paris. Among his affiliations, Dr. Penzias is a member of the

National Academy of Sciences and a fellow of both the American

Academy of Arts and Sciences and the American Physical Society.

He is also visiting lecturer in Astrophysical Sciences at Princeton

University, adjunct professor of Earth and Space Science at the

State University of New York at Stony Brook, and research

associate at the Harvard College Observatory.

42
Managing Research

in a Changing

Environment

m cannot claim to represent all of industry or even all of Bell Laboratories; what I would like to do instead is to share with W you some personal thoughts on how to carry out research.

I have a bunch of notes in my pocket, I did prepare a talk, but I will leave them in my pocket for the time being. Instead, let me

begin by expanding on what I was talking about over coffee with a few of the people from the Bureau a few minutes ago. It had to do

with jokes about a Guru on a mountaintop. The idea, with only minor

variations, is that somebody walks up the mountain to ask a

question. The punch line usually hangs on the Guru saying

something obvious. The difference between that joke and reality is only one of rather subtle degree. You are here to listen to an

"'expert," but you probably already know the answer. What we have

to do, in order to do the job that technology has traditionally done in the modern world, how to do that job better, and have that job be

perceived as being better.

I said I was going to speak specifically about myself and the

organization that I know the most about, Bell Labs. Basically, the

way we do research at Bell Laboratories, the way we have been

successful, follows three very simple rules. You get bright people,

you point them in the right direction and you get out of their way.

Let me start with the first one. How do you get bright

people? One of the best ways to start is to look at yourselves.

Conventional wisdom says that first-rate people look for people

brighter than they are, and second-rate people look for people who

are dumber than they are. We ought to ask ourselves what the

difference is. What is the break point? At what level does it happen

that people feel threatened by talent? It has to do with the amount

of anxiety that exists in an organization. I will talk some more about

anxiety later, but for the moment let me leave the point with the

observation that nothing can destroy the quality of an organization

faster than placing hiring decisions in the hands of people who

regard new employees as potential competition,

A second hiring pitfall has to do with preconceived

stereotypes. One of the great philosophers of our time, Art

43
Buchwald, made a very interesting military observation. He pointed

out that in modern times every single war has been won by the army

with the less good-looking uniforms. There is some information

there we ought to think about. People wear uniforms to look alike. When people look alike, they act alike and they think alike. When all the people are thinking alike, all but one of the brains are unnecessary. I suppose years ago when soldiers lined themselves

up in rows with muskets and fired at the other side until one side

had more dead people than the other, uniform thinking may have

worked. I do not know if it ever really did. This country was born on

the fact that our side did not form into a line but hid behind the

stone walls near Concord Bridge. So thinking for yourself worked

even in those days. It certainly works today.

Today, we want organizations in which people do not all look

alike. We need organizations that encourage diversity. What are the

odds that the small fraction of the population from which you

normally hire has all the available intelligence within it? Furthermore,

hiring from a look-alike group would not only be unfair to the people

who you have not let in, but would also be unfair to those within

because there would be none of the diversity people need to avoid

the pitfalls of group thinking.

I do not think there is much disagreement about the need to enlarge the group of people, the kinds of people, from which we

hire. In doing this, you have to go after the very best people, but you

have to understand what that means. It does not mean just going

after grade point averages. Ask yourselves what sort of questions

you ask the candidates you see. When you ask about their school

work, do you ask about the facts that they know? Or, do you try to

find out if they can think? My son is an electrical engineering

graduate this year. He talked to me about one interview he had in a

place where he would really like to work. The engineer in charge

asked him, "How many barbers are there in the United States?"

What would you do if somebody asked you that question? If your

reaction is that it is unfair because you have not looked it up, then

you are not thinking. There are many ways of doing that problem.

You can estimate how many people in the country have hair that is cut by a barber, how often they go, how many haircuts does a

barber give in a day and how many days does he work? Or, what

fraction of stores are barbershops? There are many ways of looking

at the problem, they all depend on your ability to think. Are you

hiring people who know how to think, or are you hiring people who

have just swallowed the things which exist in textbooks and brought

them back up in examinations?

There are lots of places in this country to look for bright

people. To send a few more recruiters to MIT does not do as much

good as looking around in non-traditional places, including your own

organization. There are many secretaries who are doing very

competent work in a variety of difficult tasks, but too many

secretaries are invisible when one searches for people to fill higher

44
level openings. Non-traditional hires must, of course, be coupled

with a broad and flexible in-house educational program, one which

encourages growth in your existing staff as well as new people.

What I would like to talk about next is pointing people in the

right direction. People often beat on organizations like Ford for having invented the Edsel. I think that almost every organization has

its own mistakes, whenever people deal with problems by asking

their boss what to do. In an organization that hopefully works, it is the task of the management to encourage the people in that organization to look for the right direction, then see to it that the

organization is going in that direction. This means organization thinking in a deep way, not in a

buried way. The power of science in isolating phenomena by

removing them from their extraneous surroundings is a key element

in the scientific progress we have made in the last couple of centuries. No one has ever seen a single atom hanging in space

with nothing near it. It is an abstraction, but a very useful abstraction. One must remember, however, that having removed the

extraneous items to achieve a result, it is at least as important to bring this result back into context. The alternative is concentrating on less and less, and learning more and more about it. Fundamental

should not be synonymous with irrelevant. The larger context must

be used to provide the "right direction" I just spoke of. However fundamental a scientist you may be, however much

you manage to isolate yourself in the society in which you liveultimately somebody pays you. Therefore, unless you are the

modern equivalent of some 18th or 19th Century nobleman keeping

his spare time occupied, the problems you ought to be working on

ought to involve bringing your own expertise to a larger task, looking

at context—not looking inward but looking outward. Select a

tractable piece of a significant problem rather than an area in which

there has not been publication yet.

In providing guidance in these matters at Bell Labs, I do not attempt to stay abreast of the detailed scientific literature. The

people concerned are far better acquainted with it than I would be. Instead, I begin by asking the broadest, most elementary question.

Take computers, for example. By asking what responses an

"unsophisticated" individual might want from the computer, we can

begin an ongoing discussion among the people in our group which

serves to guide our research program in computers. This usually means involving computers to solve a problem, computers as tools rather than as toys. On the other hand, some people seem to enjoy

working with computers for their own sake, leaving it to others to make use of their discoveries.

A manager of research ought to focus on objectives rather

than process. What are the uses? What are the applications? What

is it we are trying to do? What we are often trying to do is to organize information in some useful way. People talk about this being the information age. Information today is a valuable

45
commodity; as you know, valuable things are usually scarce. There

is plenty of data around, but much less information. Ultimately,

information involves the brain of some human being. People prefer

to talk, rather than write. They like having information available in written form, a piece of paper with all the information. When

someone approaches us saying "I'd like to tell you about

The usual response is "why not write it up?" even though you are probably not going to read the whole thing you have asked for. You

are going to read the introduction, look for a few conclusions and

then make up your mind. You want to be able to skim over the parts

that do not concern you. One challenge to communications

research is to provide an appropriate interface between the speaker

and the reader.

We must aim the goals of our research to fulfill a variety of tasks. This is far more complicated in the world we live in today

because the previously dominant imperatives associated with

economy of scale appear to conflict with another societal

imperative, to give the individuals more control over their own lives. We have to allow for individual needs and desires while not

sacrificing the gains we have made in the past. At the same time,

we must deal with shortages of resources. We must make fewer

resources suffice for our present and future tasks, learning how to do them more efficiently.

In such an environment we can scarcely afford the overhead

associated with layers of specialists involved in the accomplishment

of a complex task. Instead we must learn how to make relevant

information available, in concise and usable forms, directly to the

initiator of the task. In such an environment for example, computer

aids in the design of integrated circuits become a necessity because

the person who ought to be designing the integrated circuit has no

time to learn about the integrated circuits themselves. All the inter- vening steps, all the additional information required to carry out these processes from beginning to end—how to organize memory,

how close and how thin can you make the lines, how much heat

dissipation you can have on the chip—all those things have to be

done by an appropriately programmed machine. Thus the same

person can maintain control over this large set of responsibilities.

Divided responsibilities worked in the past, they will not serve us well in the future. The commitment of the greatest nation on earth, to public transportation is evident to its visitors when you

come to National Airport. Its new and very expensive Metro station

is almost unreachable from the terminal. It would be a joke if it were

not a symptom of a larger disease entitled, "my project stops here,

his project starts there." To contain the spread of this disease in the

research environment we must aim for what a friend of mine calls

"tall, thin people." People who are able to reach from one level to another, to place the results of their work into a higher context. Under these circumstances, one is able to find the right

direction because it is the end user who works on the entire

46
process. One fills the entire set of levels of understanding with a

single human being or in an organized group of human beings, not

with layers of narrow specialization. The challenge to the

organization of basic research is to supply the tools necessary to make that process a reality.

Finally, how should management act in order to "get out of the way?" after hiring better people and getting them to go into the

right direction. What are the organizational obstacles to doing things

that I talked about? Are our organizations structured to manage

tasks or just to manage organizations If you put somebody in charge

of "energy," say, and build a Department of Energy, you often find it growing until you can do little else but kill it altogether. You might

have ended up with something very different if you had originally

given the same person the job of reducing energy use. The

manager of a group is a success as long as the group grows or at least stays the same. The manager of a project is a success when

the group works itself out of business because the project is finished. Two very different approaches. Two things which seem to be the same but are not. One of the diseases of management is that every time we need to have a project done, instead of putting

together a team or a group to work on a project, we put together a group and then give the group the project. A group, almost by

definition, never gets finished.

It is not only the organization that gets in the way of progress, it is the individuals in the organization who are all-too- often really in their own way. I talked a few minutes ago with

someone, who I respect very highly, about his smoking habit. He

was telling me that one of the nice things for him in meetings is lighting a pipe and then having extra time to think before having to answer. I asked him, "are you so dumb that you would not be able

to answer questions as fast as everyone else at the meeting." it might seem pretty insulting for me to say that, but I did not have

much time, and I wanted to get a piece of information across. I have

the feeling most people have the impression that everyone around

them is brighter than they are, that "other people" seem to understand things more quickly and in the more fundamental way

than you do. The evidence for this circumstance is that everytime

that you are ready to ask a question, nobody else is asking one. They must all know the answer, and the only way you can keep up

with them is to keep quiet yourself. The few things that you do know

yourself must be easy to understand because, however hard it was

for you to learn them, when you start explaining they immediately

nod their heads; they appear to understand right away. So what

happens is you stop explaining and no one asks questions. Any

organization, and the atmosphere in which it lives, is really made up

of the attitudes of the individual people. As people, you can wish for a more enlightened boss or you can create a more enlightened

boss. You create a more enlightened boss, co-worker or subordinate by taking him or her a little more into your confidence.

47
Somebody has to be the first one to start asking questions.

Somebody, at some point, has to say "stop, I don't understand."

I was talking to a high school student a few weeks ago. She was asking me some questions about cosmology. She apparently

had a particularly primitive science teacher who was making all sorts of arrogant statements about the "stupidity" of religion, which I felt were untrue. I got mildly excited about the short-sightedness of the science teacher. The student was just repeating the science

teacher's questions, but I was responding with arguments instead of answers. Fortunately, she had the courage and the maturity to say

"you are making me feel stupid" which changed the tone of the rest of our conversation. Somehow, she had been lucky enough to go to a school which had not totally destroyed her ability to ask questions

and to tell somebody when she felt stupid, when she did not understand. I hope and pray that she manages to get through

another 10 years of education with much of that same self-respect

intact. The rest of us, unfortunately, have to strive to learn it again,

to be able to say "I don't understand," "I need more help," "you are

not explaining it clearly," "I'm going to explain this at the level which

I learned it." Doing research means asking questions of Nature. It is hard

to imagine that we can learn to ask the right questions in that sphere if we cannot first learn to ask questions among ourselves.

Having touched on the main points of managing the inner

aspect of a research organization let me now turn to the outer

aspect, the interaction between science and the society it serves.

If as scientists, engineers, and technical people, we would

like society to treat us more like human beings, we have to do two

things: We have to start acting more like human beings and

secondly we have to give up some of our "perks." The kind of fears

that we have and the kind of intimidation that goes on around us make us reluctant to throw away those societal advantages that our degrees and our limited expertise give us. We too often are ready to dismiss as nonsense the statements of a sociologist who wants to know, "how come you guys are always talking about handling

nuclear waste, and I am thinking about solar energy." It may be

frustrating to try to communicate with somebody who mistrusts

people not wearing blue jeans. Whatever the answer is, we cannot

afford the kinds of barriers that now exist and the kinds of distorted

perception that go with it. As technical people, it is not enough to do

our job, we have to be perceived to be doing our job. In order to have that perception permeate in the larger society, people have to understand what we are doing. In order for them to understand what

you are doing, you have to understand it yourself well enough to explain its larger context and implication an exercise which is not wasted motion by any means. Even if we could, I do not think we ought to return to the

days of the late 50s and early 60s, when to be a scientist, or engineer, was to be a hero; when all one had to tell the public after

48
a few billion dollars had been spent was "we learned some real interesting things about the craters on the moon," We certainly kept

any discussion of whether or not we were asking the right questions

very much to ourselves, And now, when we have more interesting

quest tc as- the r e5:^ r :e5 a

r e not :-e r e any more, Because

after all. the public does get wise, Maybe they get wise to us faster than we get wise to ourselves.

It seems to me that if our society appears to be down on its luck right now. we ought to start seeing about how to get luckier,

That great expert on luck. Branch Rickey, said "luck is the residuum

of planning." We ought to start planning to be lucky, to use the best

of our ingenuity to control our destiny. The only kind of civilization that I want to live in is a high technology society. The Greeks had

most of the intellectual advantages that we do. Their architecture,

philosophy, geometry, literature, plays, music, and poetry, were

created without the benefits of technology. All they needed was a

plentiful supply of human slaves. 1 do not think we can go back to a

society in which some fraction of people expect other people to do

their dirty v/ork for them. The only alternative to a sub-subsistence

standard of living is to have machines to do things that people no

longer can do. or no longer ought to do, like the replacing of porters

with a subway system that goes right inside the airport as it does in Zurich.

If we want our society to be lucky, technology must play a

vital role. It cannot be technology developed in a vacuum, handed

down as it were, as if people doing the technological work were somehow or a higher level. The tasks cefore us are so hard, the

problems so difficult, that we cannot succeed without help, without

coupling to the larger society and using the best that human

intelligence has to offer. If we do couple to that larger society, and

ge: our own act toget r e

r - ways such as those that I have

suggested this morning, we will be perceived to be doing a good job

because we are doing a good job.

49
William F. Miller, president and chief executive officer of SRI International, was educated at Purdue University (B.S., 1949;

M.S., 1951; Ph.D., 1956). He began his career in atomic and

molecular physics studying the effects of high-energy radiation

before turning to the computer sciences. As director of the Applied

Mathematics Division of Argonne National Laboratories (1958 to 1965), he made significant contributions to the development of computer systems.

He was the first holder of the Herbert Hoover Professorship

in the Stanford Graduate School of Business and a professor of computer sciences. At Stanford, he also served as professor and

head of the Computation Group at the Linear Accelerator Center,

vice president for research and vice president and provost.

Dr. Miller is a member of the American Physical Society, the

American Mathematical Society for Industrial and Applied

Mathematics, the American Association for the Advancement of Science, the American Management Association, Sigma Xi, and is a

fellow of the Institute of Electrical and Electronic Engineers and the

American Academy of Arts and Sciences. He has been a visiting

scholar at the Center for Advanced Studies in the Behavioral

Sciences and at the International Institute for Applied Systems

Analysis in Laxenburg, Austria. He also serves on several national

advisory councils to government agencies and private foundations.

50
The Software Edge

I 1 lith the United States under great economic challenge from

^^1/ other nations it is important for us to look for our strengths

BT as well as our weaknesses. We need to look for our W weaknesses in order to see what corrective actions can be

taken. We need to look for our strengths in order to build on them.

One of our great national assets is our human resource in the area of software for computers and for microelectronics. In the area of computers and microelectronics the name of the game has

become software.

Heretofore, it has been principally a U.S. game—of course,

not exclusively a U.S. game—but principally a U.S. game in the sense that the major volume of software work had been done in the

U.S. We have not done all the lead research and we certainly have

not done all of the production. Overall, however, in terms of software for computer systems, and especially in terms of applications in business and industry, the U.S. has been a very clear

leader. That situation is changing.

My main thesis is that for the present time the U.S. has a

margin of advantage in software production. We ought not only to maintain that margin, but we also ought to capitalize on that margin

vis-a-vis global competition. We do not have a monopoly. No

country can expect a monopoly. But we do have a comparative

advantage on which to build. Executives from foreign electronics

companies seeking to locate in America have told me that the

availability of software talent is one of their principal reasons for coming here. Other countries are developing software talent and

techniques, trying to narrow that margin of advantage the U.S. has. I believe in competition. I believe that there should be competition.

The very fact that other countries are catching up with us in many

areas, and even moving more rapidly in some, means that we have

to revitalize ourselves to maintain a competitive position. Software can be a very big factor in the revitalization of America.

I am talking today about software, and its impact and its role

in the revitalization of America. Although I think software talent is a

national asset, I am not so naive as to suggest that any one issue or

51
any one technology will alone have a major impact on revitalization. Many changes are needed in both public and private policy before

the U.S. can regain its economic momentum.

Many industries believe that they cannot invest sufficiently in research and new technologies because of the burdens of government—both regulation and taxes. Additionally, many of the

developed industries believe that labor must come to an

understanding of and accommodation to the need for automation

and increased productivity in order to meet foreign competition. This

whole area of the socioeconomic impacts of new technologies and

changes in public and private policy to accompany revitalization is an important one I shall not go into today.

Turning back to our main subject, let us look for a moment

at the total impact of the information society on the U.S., and move

from there to the impact of software and the scope of the software

industry. Finally, let us look at some strategy for America's efforts in maintaining the software edge.

Even for those of us who 25 years ago were true believers

and were forecasting "The Rise of Digital Man," most of us are still greatly surprised by the breadth and pervasive impact of the

information society on our industrial development. The effect is similar to the transition from the agricultural to the industrial society.

In the early days of the industrial revolution, farmers, plantation owners, and owners of estates and trading companies associated

with the agricultural industry resisted the industrial revolution. They

resisted its advent in every way possible. Those with vested

interests in the agrarian society looked at industrial development

simply as a companion activity to the agrarian activities, and as a source of competition. They did not see those industrial activities as

being directly applicable to agriculture.

About the middle of the 19th century it became clear that science and technology could have a direct impact on agricultural

productivity. In the United States this led to the establishment of the

land grant colleges for "agriculture and the mechanical arts," to the

development of agricultural research stations, and to the

development of the county agent system. The county agents were

carriers of change, bringing research to farms, ranches, and

plantations. Agriculture had indeed embraced the industrial society.

Correspondingly, in the early days of the development of the

information revolution many industries and businesses viewed the

information business simply as a companion business. They did not see it as having a very direct or pervasive impact on their businesses. Today, there are few businesses or industries who can

ignore the direct impact of the information society, although most of them do not yet recognize the central role of software in current developments. They do not recognize it, that is, until they have to try hiring programmers. Computers and electronics for both data

processing and communication have affected not only the hardware

52
industries and the engineering industries, but they have virtually

permeated every conceivable industry, even invading the home.

One way to get a sense of the massive effect of the

information revolution in the U.S. is by examining the changes in the

work force over the last few years. Figure 1 shows the transition of the work force from the middle of the 19th century to 1980. This

figure reflects a tremendous restructuring of the U.S. economy,

especially in the last 25 years, due to the impact of the information

society. If anything, figure 1 understates the impact. This shows the

part of the work force that is directly involved in the information

society. Not included in this representation are student use, home

use, or business and industrial use by teachers, managers, or other

specialists.

The information society's impact in other countries is extensive. In a few areas of application there are countries ahead of the United States. We have much to learn from them, but across the

board the impact has not been as pervasive as in the U.S. In particular, the industry's development of the software component

and the impact of software in other sectors of industrial development is greater in the U.S. than abroad. U.S. business and

industry have embraced the information society in much the same

way that agriculture embraced the industrial society about the

middle of the 19th century.

In figure 2 we will look at the scope of the software industry.

Already by the early 1970s the cost of software had exceeded the cost of hardware when in-house software development and

maintenance is included. By the end of the 1970s many changes

occurred including the unbundling of software. Both computer

manufacturers and computer systems houses recognized that the

growth part of the industry was in the software arena and were

turning to that area to sustain their growth. Perhaps it is too soon to recognize how the various hardware manufacturers will play the

game between software and hardware, given the extent of unbundling. There is little doubt that software will play a major role

in the growth companies that have, heretofore, been principally

hardware companies. For example, Hewlett-Packard, a company

principally in the scientific instrument and computer business, now

invests very heavily in software and computer science.

Companies in the service market area, such as forecasting,

and companies that perform problem solving through the use of sophisticated or generalized business applications are expected to grow at a phenomenal rate in the next 5 years—perhaps as much

as 20 percent a year. These companies are principally in the

business of selling access to computer models and data bases.

Previously, the principal targets for these agencies have been other

businesses. In the future, one of the large target markets will be the

direct consumer. Already one can get various financial services and

financial reports either by acquisition of casettes for home

53
o

54
Figure 2.—Growth of Software Costs

1955 1970 1985

Year computers or through remote access. The independent software

market is also expected to grow very dramatically, perhaps tripling over the next 5 years.

If we assume both the business and consumer public, which

acquire these services, are making wise decisions, then the impact

of the information society on business, industry, and the individual is going to continue at a rapid pace. Of course, we may not trust the

judgment of these people who are acquiring all of these services,

but I tend to accept the marketplace as an efficient process. I believe, in these days of heavy emphasis on economy and

productivity, that most purchases will have a very reasonable

expectation of being effective. Let us now examine more briefly the major sectors of software development in the U.S. Up to this time, one of the largest areas of software development has been in support of large-scale

computing systems including timesharing and multiprocessing

systems. An even larger area of support has been in the

55
applications carried out on those systems: very large-scale design

calculations, large data base operations, and financial services.

Over the last few years, systems support for microprocessors has

become a very active area of software development and gives

promise of continuing to be an active area for years to come. That

must be followed by applications of microprocessors including the

software used in those applications. Communications is becoming a

significant user of software, not only is electronic mail becoming more widely available, it is even available on a commercial basis at

this time. The linkage of computers, especially microprocessors,

with the other aspects of the communications industry and

television in particular has given rise to a hybrid business that also

has promise of developing very rapidly. And of course, the

continued development of data bases currently referred to for diagnosis, sales information, financial information, and technical

design considerations will continue to be a very active part of the

software business.

The large chemical industries' data base and the Lexis

system for bibliographic legal searches—all will have increasing

importance in the future. Those industries having access to key data

bases will have a large comparative advantage over their competitors.

Finally, education and training are going to see continued

emphasis on software development, the development of both

learning programs and the data bases for education and research.

How can we continue to capitalize on this software edge?

How can we maintain this edge? First, we need to produce more

computer scientists. Even though they are coming out of the

universities in very large numbers, the demand still exceeds the

supply by a considerable amount. Between 1979 and 1980 the

increase in overall demand for computer specialists of all kinds is estimated from 30 to 50 percent. Given the rate of increase in demand, we are by no means keeping up. The National Center for Education Statistics estimates that the number of students obtaining

bachelor's degrees in computer science will increase by about 35

percent in the next 5 years. There are, of course, other sources for computer specialists. Immigration provides a source as well as

retraining professionals from other fields, or upgrading staff workers

with a company. Nevertheless, it is abundantly evident that the

supply is by no means going to match the demand.

One of my colleagues humorously displayed the problem on

the following graph, (fig. 3) which suggests that by the year 2025, if we follow simple projections, we will all be programmers. And why

not! This leads to the next important issue in maintaining our software edge in the United States. Programming has to become

more efficient and more reliable. This means business, government

(both state and federal), and private universities should continue to support software technology.

56
Figure 3.— Population of Programmers

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World Population —

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2000

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Year SRI does research in computer science and software

sciences, including software technology. We also do a great deal of work in applications of large computer systems, helping both

governments and corporations develop their computer systems and

products. We know the need for more research on efficiency of programming and reliability of software from our own application

experiences.

This is old hat to many. We know that many industry people

have been calling for more efficient programming for a good number

of years. But I am happy to say that much is happening.

Programming is becoming more efficient and more reliable. There is a dramatic increase in the use of programming tools and aids for computing. This is especially so in the area of microprocessors. The

growth in the development of programming tools for microprocessors is matching the growth that we experienced for large-scale systems 10 years ago.

Figure 4 illustrates the net cost of a typical program

development using more sophisticated programming techniques.

You can see that in going from machine language programming to

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58
the use of PASCAL, the net program development cost decreased by

almost a factor of 5. Every system does not have such sophisticated

programming tools and one cannot suggest that all programming

costs can come down by this full factor of 5, but this measurement

does indicate that efficient programming tools can contribute greatly

to programming productivity.

In addition to more efficient programming, we must have more reliable programs. Efficient programming tools contribute to

reliability. In addition, the development of fault-tolerant computers

and verification schemes have tremendous economic and technical

payoff to the products that critically depend on computations. In products where the value added to hardware is primarily the

software, well engineered, reliable, and efficient running software

becomes a must. Moreover, it is absolutely essential that we

develop these tools for efficiency and reliability, and put them in the

hands of educators for their students, those students who will become the professionals "carrying the ball" in the software

development area of the future. What is so unique about software thinking? My thesis is that software thinking is quite different from hardware thinking. Software

thinking is much more a problem solving type of thinking. Of course,

in good products and good instruments software and hardware must

function together in a supportive and compatible way. The designer

of an instrument or a machine should think about the software at the same time as the hardware. I have frequently watched the

development of instruments and products by engineers who had no

training in software and compare that with comparable

developments where a great deal of software thinking was present.

In the former case, the designer generally looked to see what could

be measured or controlled, and eventually thought about the data

analysis or control system that should be attached. In the latter case, where a lot of software thinking was present, the designer

thought in terms of the problems to be solved and what software

and hardware were available and necessary to solve those

problems. In the latter case, one had more effective data analysis

and control, and certainly more flexibility in the design.

The new robots that are being developed by U.S. companies, and that are in early use for assembly line production of heavy equipment, are programmable robots with sophisticated

software. They reflect some excellent software thinking. I suspect

that the lead in robotics will shift back to the United States because

of the level of software thinking that has gone into U.S. robotics.

I was recently shown through a heavy industry

manufacturing plant in a foreign country by the general manager

who told me he had designed the automation equipment. This

factory is highly automated by anyone's standards today. One could

clearly see the presence of good hardware engineering and good

hardware thinking. But there was not software thinking in the

development of that system. The system works very effectively at

59
this time, but when it becomes necessary to modify the production

line to different products or major components, the line will have to be completely disassembled and reassembled. It is like rewiring the

program. In the future, a bit of software thinking in the design of the

whole factory would permit a more flexible and more rapid

changeover. I am not suggesting that one could have a factory so

automatic that one simply reprograms the whole factory, but there are critical points that could be reprogrammed more handily than is the current case, thereby saving enormous amounts of cost and

time in the changeover.

This concept may be less important in very large-scale

production plants than it would be in high technology production.

Design automation is getting a great deal of attention now for application in the VLSI industry. Design automation is principally a

software game. In thinking about the problems that have to be

solved in designing efficient circuits one has to think of the software

issues first. Here we see great potential for modern computer

science research in problem solving and in artificial intelligence to be applied in manufacturing. Artificial intelligence is one of the areas

of computer science that is being actively pursued by many

companies in the electronics industry today.

Software is a way of thinking. I can illustrate this by an anecdote from my early days in computing when I was a graduate

student working in the summer at the Argonne National Laboratory.

During the construction and programming of two Princeton-type

computers which were built there, namely the Avidic and the Oracle, one being built for the Argonne National Lab, the other for the Oak

Ridge National Lab, I noticed that several of the staff were busily

converting decimal numbers to binary form for input to the

computer. I asked, "Why don't you let the machine do the

conversion?" They replied, "We wouldn't want to waste machine

time on such trivial tasks." How things have changed! Most of you

find that very amusing. Incidentally, the numbers were being read in on the paper tape through a mechanical paper tape reader. Since I simply could not stand that attitude, I generated a character-bycharacter converter that did the conversion calculation in the time

interval between readings of the characters by the mechanical

paper tape reader. This process did not waste any machine time

since machines were not multiprogrammed in those days. Also,

since it did not waste any machine time it was an easy conversion

to sell. But the main point here is this represented a different way of

thinking. The machine was there to serve the total activity of the

scientist, not simply selected parts.

There is one area where software thinking will play a tremendous role and is already playing a tremendous role—in the area of office automation. Almost all the value added to the

hardware that will be provided in office automation is going to be

software in the most general sense: software programs within the

computers and procedures external to the computer for using the

office automation. As long as the planners of office automation

60
systems think in terms of applying hardware to specific tasks they

will fail to get the major impact of office automation. To get the full impact it will be necessary to consider the integration of various

office systems being used or that have to be used in the future. That

design should precede the selection of the hardware to handle the

problem. Office automation does provide a real opportunity for increasing our productivity. In addition to an integrated system

design, it is going to require a thorough education and employee

involvement in the development of systems, in addition to continuing

education. In the first place, office automation must not be viewed

as a threat to office workers. Participation in the development helps remove some of the threats. Additionally, most office workers are

not going to understand the impediments to productivity. Each has

his or her pet idea, but most of these are untested and the design of the system needs to allow for change and improvement. That, of course, speaks heavily for an effective software effort. Let us turn now to an important issue for American

industry—an issue that is especially important for the computer, and

especially the software industry. That is the management of human

resources. A great deal of attention is being given to human

resource management. A business week article on the

reindustrialization of America made a major point of the renewed

emphasis on human resources. We especially need to learn how to manage innovation.

America has a very strong reservoir of individuals trained with

excellent management skills in the technical sense, that need to be

augmented by training in managing human resources. Recently, I have been thinking a great deal about the revitalization of American

industry vis-a-vis global competition. This caused me to reflect upon

J. J. Servan-Schreiber's book, The American Challenge, written in 1967. In that book, Servan-Schreiber underlined the need for France and Europe to learn management, American style. "The

Americans are coming, the Americans are coming!" was his theme.

Americans are better at organizing, production control, and

marketing. If they were going to meet this American challenge, they were going to have to learn those skills. Let me teli you that they

have learned all that, and much more. Our foreign competitors are very effective in their management today.

In searching through the book for clues that would suggest

how we could revive our industrial activities to bring forth a second

American challenge, I ran across a quotation I missed on the first reading. Servan-Schreiber was saying in this particular quotation

why the Americans were so good at management. He said, "All cliches to the contrary, American society wagers much more on human intelligence than it wastes on gadgets." That is the part I missed. There is the part that most people missed on reading

Servan-Schreiber. What is he saying to us? He is saying, "invest in education and R&D; invest in intelligence." That is why America has

done so well, and because of that we came on strong with the first "American Challenge." That is still the right message. We have

61
forgotten it. The message should be not simply to exercise those

skills that we had developed previously, but to find new ones and

exercise those in the management of our industry. Find our new

strengths as well as our weaknesses.

There are some wonderful examples of what can be done

with proper human resources management. One fine example is that of the Dana Corporation in Toledo, Ohio. The chairman of the

corporation, Ren McPherson, is now Dean of the Graduate School

of Business at Stanford University. McPherson, while chairman of Dana, doubled the (per capita) productivity of the corporation in 7

years. In effect, he doubled his company without capital

investments. Dana Corporation paid attention to the skills, to the

work habits, to the ambitions, to the enthusiasms, and to the

criticisms of their employees. This is an important lesson for all of American industry, and an important lesson for us in the computer

industry and the software business.

I want to close with a number of messages for America—six of them in total. First, think software. Software thinking is problemsolving thinking. Think of software in design of our computer

systems, in design of our office systems, in design of instruments

and products. We have a greater capacity than any other country

and a considerable comparative advantage in software development

on which to capitalize. We certainly do not have a monopoly, but in today's world one cannot expect a monopoly, only a margin. Put software in our products. Do not let them leave home without it. The

next round of industrial development can be ours. Secondly, we should continue to invest in the development

of our human resources through education, training, and

management of their capabilities. We should remember what J. J. Servan-Schreiber said about the great advantage that America had

in the first American challenge.

Third, we should invest heavily in software R&D, both within

the industry and in the public sector. Software research and

development will contribute not only more efficient programming

and more efficient products, but more reliable and more flexible products.

Fourth, software is a major key to increases in productivity,

manufacturing, and in the office. We know relatively little about the

principal factors in white collar productivity. We need to be

experimental in our development. Software in the system permits an

experimentation, a variation, a flexibility for us to discover the key

factors of productivity and optimize those once we have discovered

them.

Fifth, we need to place more emphasis on the control of the

manufacturing process of software. Software on a chip is now

feasible and practical, providing a means of controlling the

manufacturing process, ultimately putting higher value on the

software itself. I believe that we have been selling our software too

cheaply. When software was viewed as an adjunct to hardware,

buyers wanted to pay as little as necessary. In the extreme, they

62
looked at it as an operations manual for the hardware. When you

think of software as the key ingredient in the system., the part of the

system that contains the intelligence of the system, it begins to look

much more valuable. Now that we have discovered that it is a valuable commodity, we need to begin to price it accordingly. I am

reminded of the underdeveloped countries selling their resources to colonial powers when they did not really understand the value of those resources, be they minerals or oil. They more or less took

what they could get for them. As time goes on, the importance of good software and the means of measuring and identifying good

software will increase its value. Being able to put software on a chip

will give the means to control the manufacturing process, an

essential ingredient in pricing for value. The sixth message is that, through software and in software,

we should play the innovation game and capitalize on the innovative

qualities of our computer scientists and specialists. At this stage of global development we have more computer specialists trained to be innovative than is the case among our competitors. One of the reasons for our lead is that we encourage innovation in our

students. We encourage our students to play—serious play, but

play—on computers. As more home computers become available

we will find even more of this playing on the computer. In many

countries when the professor gives the student a problem and the

student approaches the machine, the suggestions of the professor

are followed as accurately as possible in order to get the solution

right, using very little machine time. In the case where our students

have sufficient machine time to play around, or when they have

home computers on which they can experiment, they will try any

solution but the professor's first in order to try to outdo the

professor. They only use the professor's scheme as a last resort or when they are in a great hurry. This creates a more experimental

-and innovative attitude on the part of our students. It may create

less discipline, so we need to adjoin to this innovative spirit sufficient recognition of the need for discipline in turning-out

products. On the other hand, we have an outstanding, innovative

human resource. We need to learn to manage it well. The

innovation game is our game. We need to capitalize on it while we

revitalize America.

Discussion

Q. Because of the high demand, many students are going

to work immediately after receiving a bachelor's degree rather than

go on to do research and work toward the Ph.D. Is this not destroying some of our capability? A. I think competition does have certain destructive

aspects—it always will. You can also look at it as giving rise to stronger entrepreneural spirit. Nine of my students have become

professors and three have become millionaires, and I think tne dichotomy is very sharp. Some people ask me, was not the very fact

63
that there were so many instant millionaires in Valley having a

destructive effect. There was a concern about the competition

between industries there and partly drawing people out of the

universities. I had a different view of it. I believe that has given rise to a renewal of an entrepreneural spirit which is very important to innovative industry. That is the price you pay. We need to encourage more research, we need to support research, and when

its a lot of fun, people still go into it. There are people who still believe in the certain element of delayed gratification. SRI is a

wonderful example of people who are very happy at what we often

call a halfway house, that is, halfway between a university and an

industry. We have a lot of people who would like to share some of the benefits, namely money, from industries and who would at the

same time like an academic setting. They cannot get both of these

if they go either to the university or to the industry. But we try to provide them opportunities. For example we changed our patent

policy to share the royalty with them a little more, to make it more

attractive to stay rather than to have to go to industry to capitalize on that. So I think we have to address this problem and try to keep more people in research, but I am not fearful that this is going to destroy the industry.

Q. I am wondering if your comments on the need for emphasis on education and intelligence on the one hand and your

emphasis on the need for hardware and software to become flexible enough to allow for experimentation on the other hand does not apply to conflicting trends in the way people think in the future. In particular with research, what I am asking is do you think research

will become more imperical as opposed to theoretical in the future because of the easy access to both hardware and software?

A. There are lots of ways to approach theory. Some of the

finest theoretical research I know is based on imperical work.

People had to experiment a great deal in numerical analysis. It applies in the experimental area of mathematics as well as in physics and other areas. I do not find introducing empirical research

in problems, which are ultimately theoretical problems a

disadvantage. I am thinking of one of my friends, Felix Block who is a theoretician. He conducted experiments first before he developed

his theory, so somehow your concern does not bother me. If you are worried that people will fail to follow up with developing a theoretical

understanding, that could become a problem, but people are

inquisitive and that is why it does not worry me very much. Now I think the availability of theory in areas we really do not know much

about, such as office automation and productivity, everybody has a

little pet theory, is very slight; I think experimentation there will be

very valuable.

Q. A number of years ago the Philosophical Society of Washington had a talk on computers by Emanuel Piore who was

then head of research at IBM. I asked him a question at that time

relating to numbers in base 10 or in base 2. What number would be

64
the most efficient? And he said the debate was dead, end of comment. He did not explain why.

A. I never did understand that answer. Back to the

opportunity to do empirical work. Experimental work impacts

theoretical work. I remember in the early days when there were an

awful lot of people who simply did not want to have floating point

arithmetic on their computers. That is always very important for the

mathematician to understand every time you are going through a program floating point operation. Actually it turned out that the

advent of floating point hardware created some terrific research on

the part of Jim Wilkinson; he really did some wonderful error analysis. Nobody today would think of not wanting floating point

hardware unless it is a matter of cost. Q. I firmly believe in software, yet one reads now that software industry is like a little cottage. I wonder if you would like to comment on what you see as the future trends of software. A. I do not find a cottage industry unattractive. I think that is wonderful, actually. I know of a case of a woman who had children

and found it difficult to also have a full-time job, so she started a

little business specializing on one company's machine and doing one kind of business software. Last year she booked ten million dollars out of her house. It is a nice cottage industry. There is nothing wrong with a cottage industry, I think it serves a very good

purpose. I had it presented to me that these people are similar to the county agents in the agricultural areas. They are some of the

carriers of change and one might make a reasonable argument for

that. There are a lot of places where there is a strong concentration,

however, of software science and software technology research, so

I do not think that is being neglected. I mentioned Hewlett-Packard

and others. We say that because people are raiding our software

talent and our artificial intelligence group have four of them taken

out to another major company to work on artificial intelligence for them. So I think there are strong pockets of development there that

will get a lot of the research done, a lot of the advance work done. I am encouraged rather than discouraged by that. It is kind of nice to have a cottage industry and that is actually contributing to what

Talford calls the Third Wave. You find right now many more people

working at home because of the work on terminals, work with their offices and that is going to create some of these changes.

Q. You indicated that we must pay more attention to the

Nation's investment in R&D. How can a Nation forget the lessons of the past and how can we go about reinvesting?

A. Well we started forgetting about 1970. In another speech

I give from time to time, I have a slide that shows the percentage of our GNP going into research and development. We had forgotten

what Servan-Schreiber told about us about investing in human

intelligence. Starting about 1970, actually, our R&D as a percent of GNP was going down in the U.S. whereas Japan and Germany were

starting their drive and they were coming up. I am happy to note that

65
in 1979 there was a slight upturn. Now there is good news and bad news in it. There is a slight upturn in the percentage of our GNP

going to R&D and I think that is very good. The bad news is it was

not because of the increased R&D it is because the GNP did not go

up as fast as it was supposed to. This is the source of a big debate

in this country. I think in many ways now people are reminded that they had forgotten what Servan-Schreiber was pointing to. I am

encouraged by that and hope that it continues. I think we see it in industry and a lot of the drive in the industry-government

relationship now is to make it affordable for industry to invest in R&D. But we did forget.

Q. Could you expand a little further on your comment on

the pricing of U.S. software?

A. I think one could be selective about what are the

interesting things that people begin to see as monolithic in an

industry or a product—but they are not monolithic. Software is not

monolithic either. There is some software that is valuable and there

is some that is not, there are some areas where it is especially

valuable. I suspect, and I have good reason to know through various

proprietary activities, that there are companies that are going to put

very high value now on good software in robots because they are

still recognizing people in this country who have some very good

software in robots. And the people who sell that to them ought to take that into account and jack the price up. If they do not they are missing an opportunity.

Q. Most of your comments apply to the private sector. Can

you suggest anything that Government itself can do in terms of policy or in terms of research?

A. In referring to my talk as I mentioned before, I often talk about what I call the positive forces of Government as well as the

negative forces. There is a great deal of concern now, which I think

there should be, in clearing out some of the underbrush and

allowing the private sector to accomplish some of the things that it can accomplish. I am very supportive of that. My association of the

NBS and Commerce is a very theoretical one—it goes all the way

back to Herbert Hoover. I once held a professorship in his name

and I had to learn something about Herbert Hoover. Herbert Hoover

believed that ... I am oversimplifying this immensely ... but he

believed that the Government should have the major responsibility, not all, but a major responsibility for the infrastructure. My argument

is that R&D is a part of the infrastructure of a highly technological

society, and so positive thrusts in this area are very important. One

of many wonderful examples of this is agriculture. I think that we

should not neglect those positive thrusts. R&D is my principal

message, but I think looking at regulation that will stimulate R&D

and so forth is also very important. Artificial intelligence can be

taken as an example of something that just would not have

happened without the federal government. Farsighted people in certain areas like ARPA understood the importance of artificial

66
intelligence, but no commercial business would have supported

artificial intelligence. In fact, they scorned it. It was not attractive at

all, it had a bad name. But now the problem solving capabilities that have been generated in artificial intelligence research are being

used in design automation. I think that is a very strong message in the manpower development and in R&D. There are others. I have a

concern, I do not know how big a concern because we are rather

abysmally ignorant in this area, but as we try to introduce more

automation in both the office and in industry, we do not know what

can and should be proper response of labor. And I do not

necessarily mean labor unions. I mean the working force. For

example, we do not know the demographics in different areas well enough to know whether attrition will handle the problem or whether

as is in the case of the electronics industry, you simply withdraw

your offshore labor. We do not know what can happen, and I think

there are some very important kinds of studies that ought to be

done and are not likely to get done unless somebody coordinates

among several agencies, and this is one of them.

Q. You spoke a lot about the efficiency of software, but you

did not say anything about the transportability of software. Would

you like to comment on that? A. Well, the question which Ernie is raising is about the

transportability of software. The more it is written in the higher

language the more transportable it becomes. The reliability, efficiency, and transportability are in many ways wrapped together

because you achieve a lot of that through use of structured

languages and structured programming to generate the application

programs. That does not make it automatic but it certainly makes it far easier to transfer from one machine to another. I believe that many of the early office automation machines, word processing

machines, had their own little languages in them so that application

programs were not transportable. But as we are now getting more of these tools into those microprocessors, that problem is being

resolved in the favor of higher languages for even the office automation application software. And I think that will contribute a

great deal to the portability.

67
Dr. Richard R. Nelson is professor of economics and

director of the Institute for Social and Policy Studies at Yale

University. His research has focused primarily on the processes of long run economic change, with particular emphasis on

technological advance and on the evolution of economic

institutions. Dr. Nelson received his B.A. from Oberlin College in 1952

and his Ph.D. from Yale University in 1956. He has been assistant

professor at Oberlin College, economist for the RAND Corporation,

associate professor at Carnegie Institute of Technology, and senior

staff member of the Council of Economic Advisors.

In addition to these positions, Dr. Nelson has served as a

consultant and panelist to a number of government agencies

including the Bureau of the Budget, Council of Economic Advisors,

Office of Science and Technology, National Science Foundation,

National Academy of Sciences, and the President's Science

Advisory Committee.

68
Technological Advance and

Productivity Growth:

The Roles of Business

and Government

M nterest in government policies to spur industrial innovation

|| waxes and wanes. Only a short time ago the domestic policy

preview was all the rage. Observers may differ as to whether W or not what it brought forth was a mouse, but if it was a mouse it was a lively one. Generic technology programs, the

cooperative automobile research program, new mechanisms to

facilitate industry-university interaction in research, and more were

proposed and introduced. While the view on these matters of the new administration is not yet fully apparent from what we have

heard that view is likely to be a skeptical squint. Industrial innovation

is the realm of business. By and large government should stay out.

I do not think we have heard the last word on this topic, even within this administration. In the early days of the Kennedy

administration there was considerable interest in a civilian technology program. The interest faded. The fire was rekindled

under the Nixon administration, but then petered out. Carter started

the fires again, and now again they are damped. They will flare up

again. Let me state my own position. I believe that active

government policies have, in a number of industries, been very

successful in stimulating industrial innovation. In the concluding

section of this paper I will discuss some cases. But first, I want to set the stage by surveying some of the things that are known, and

not known, about the role of technological advance (read industrial innovation) in productivity growth, and about research and development as a source of technological innovation. Next, I want to consider the economic incentives and mechanisms that stimulate

and guide industrial innovation. This will set the stage for a

consideration of the diverse, but often influential, roles the U.S. Government has played in the generation of new technology.

Technological Advance, Productivity Growth,

and Research and Development

My focus in this section will be on what economists have

learned about the sources of productivity growth in their researches

69
on that topic, conducted largely over the past 2 decades. The late 1950s marks both the resurgence of interest by economists in productivity growth and technological advance and the

establishment of a particular methodology for studying the relevant

questions. However, the interest of economists in technological

advance and productivity growth goes back much farther. Chapter I of Adam Smith's The Wealth of Nations is mostly about those

topics. An important portion of the writings of the great 19th-century

economists was concerned with long run economic growth, and

virtually all recognized technological advance as the central source

of growth.

Somewhere around the turn of the century the formal

theoretical work of economists began to concentrate on equilibrium

conditions and steady states. As a result, empirical research on

long-run economic growth gradually came to be separated from the

theoretical mainstream. This is a condition which, in economics as

in any other field of inquiry, reduces the coherency of research in the empirical field, and leads ultimately to a falling away of interest

in it, no matter how intrinsically important the topic might seem to be, when viewed through lay eyes. Thus, during the 1930s, 1940s,

and early 1950s not much research was done by economists on

long-run economic growth. Part of the reason was that the problems

of depression, of wartime mobilization, and of postwar

demobilization naturally were drawing the most attention. But part of the reason, I suggest, was that economic growth was not then a

topic of much theoretical interest. During the 1950s, however, for a variety of reasons there was a surge of empirical research by economists on long run growth. An important empirical finding began to claim attention, and soon received a pregnant theoretical interpretation that rekindled

widespread interest among economists in the subject. The empirical

finding was that growth of output in the United States had been

proceeding much faster than growth of (an index of) inputs. The

theoretical interpretation was that the excess of output growth over

that which could be explained by input growth was a measure of technological advance. This simple proposition (together with some

techniques for estimating how much output growth input growth can

explain) gave theoretical standing to research on productivity growth

and technological advance.

The labeling of the part of productivity growth unexplained

by input growth as "technological advance" was quite like the

practice of physicists in preserving certain balance relationships by

hypothesizing (then) unobserved particles, like neutrinos. It is a

holding tactic, to preserve a prevailing theoretical stucture with

minimal change. Ultimately, the acceptability of the revised

formulation must depend on being able to observe technological

advance (neutrinos) more directly. Further, there is a presumption

that direct evidence about the presently unobserved variable, when

ultimately collected, will turn out to be consistent with the

70
interpretation of that variable within the prevailing theory. Otherwise,

some major reconstruction of that theory might be in order. I gather

that recent findings about neutrinos are making physicists do some

basic rethinking. As I shall explain in a minute, with respect to "technological advance" things also have turned out to be more

complicated than originally had been expected.

During the 1960s and 1970s a number of economists

pursued knowledge about technological advance working roughly

within the theoretical framework sketched above. Some of this research has been called "growth accounting." Here the strategy is to make a finer and more complete listing of factors of production

and devise better methods to estimate the contribution to output

growth of their increase. The "residual" is the measure of technological advance. Other scholars have used multiple

regression techniques, with output regressed against inputs, and

time; the coefficient on time has been interpreted as a measure of technological advance. Still other scholars have hypothesized that technological advance ought to be related to research and

development spending. Some of this work has employed multiple

regression techniques with the estimated contribution to output

growth of R&D interpreted as the contribution of technological

advance.

Studies of this sort have been undertaken to try to explain

the relative roles of different "sources" of growth over time in a

country, like the United States. In virtually all of these studies, of other countries as well as the United States, the contribution of technological advance, defined as a residual, or a time trend, turns out to be large. Time series evidence on the role of R&D in productivity growth, at a macro level, is less conclusive. While the

1960s were marked by both rapid productivity growth and a high

ratio of R&D to GNP, and in the 1970s both fell, the evidence that the fall off in R&D caused the productivity growth slowdown is not persuasive. There are too many other factors distinguishing the

1960s from the 1970s for correlation to be interpretable as

causation.

Other studies have tried to explain differences across

countries in productivity levels at a given time, and productivity

growth rates over time, by similar techniques. Here, differences in technology levels turn out to be a large part of the explanation for differences in productivity levels, and differences in rates of technological advance, as measured by the residual, are the lion's share of the differential productivity growth story. However, here too, research and development does not come out too well as an

explanatory variable. There is not much of a correlation between a

nation's total R&D spending, or R&D spending as a fraction of GNP,

and its productivity growth rate. This should not be surprising.

Throughout the postwar era, until recently at least, productivity in the United States stood significantly above productivity levels in the

other trilateral countries. Undoubtedly much of their productivity

71
growth, since the mid 1950s, is associated with their adoption, and

modification, of American methods. While their R&D efforts

significantly facilitated this process, one would not expect the

connection here to lead to any tight correlation between a nation's

R&D efforts and its productivity growth. Except when one is in the

forefront of technology, technological knowledge is sufficiently

public and international for a relatively modest R&D effort to permit a nation to exploit, with a lag, the technological developments

created in other nations. At the forefront, of course, the situation is different. Perhaps the R&D effort of the United States has been more important in its productivity growth than the R&D efforts in other countries have been to theirs. And now that there are a

cluster of nations at the forefront, and the United States no longer

stands alone, R&D may be increasingly important in establishing, or preserving, the competitive edge in rapidly progressing industries. Several studies have identified and tried to explain

significant differences across industries in measured rates of productivity growth. Much of that work has been concerned with

differential productivity growth among industries in the United

States. Here R&D is an important part of the story. Industries

experiencing the most rapid productivity growth have tended to be

those in which the firms themselves spent a considerable amount

on R&D (like electronics, pharmaceuticals, and chemicals) or

industries in which the equipment or material suppliers spent a

considerable amount on R&D (airline services). In contrast,

industries where little is spent on R&D either by firms in the industry, or by supplying firms, have tended to experience slow productivity

growth.

The studies described above have usually been done at an economy or industry wide level, using published economic statistics. There also have been a number of studies in which the effect on

productivity of particular technological advances (for example hybrid

corn) has been assessed. The contribution to productivity of some

of these advances has been spectacular. Where data is available on

total R&D spending on a technological advance, as well as on the

productivity growth permitted and the extent of use of the new

technology, it is possible to estimate rates of return. These

estimates have tended to be very high.

Economic Incentives and Mechanisms, and Industrial Innovation

At the same time that some economists were exploring the

role of technological advance in productivity growth, and research

and development expenditure in technological advance, other

economists were studying the economic incentives and

mechanisms that stimulate and guide industrial innovation. Some of that research was concerned with identifying the factors that influence the kinds of inventions and innovations that occur over

time. Economists, historians of technology, and other scholars,

recognized two different classes of influence. On the one hand, it

72
was apparent that the inventions of an era are heavily influenced by

what is scientifically and technologically feasible at the time. On the

other hand, it also is clear that invention and innovation is strongly

influenced by what inventors and innovators think will be

profitable—that is by perceptions of the state of the market. For some time scholars of these questions argued with each

other regarding which of the two kinds of influence was the most

important. Ultimately, it became obvious that both were important,

but that their roles were played in somewhat different ways.

Research has pinned down persuasively that changes over

time in the pattern of demand for goods and services tend to be

followed by changes, in the same direction, in the pattern of inventive activity, as measured by patents applied for and granted.

The rise of the auto industry and the decline in use of horses, is reflected in a change in the composition of patenting in the same

direction. The high cost, during the 19th century, of American labor

relative to British led to particularly strong efforts in the United

States to devise methods that would conserve on labor, even if these methods were costly in terms of materials used. Conversely,

the high cost of materials in Britain and the low cost of labor led to inventions which conserved on materials. The recent rise in the

price of energy has led to a sharp intensification of efforts to devise

techniques to save on energy. Thus, the effect of market conditions on invention and innovation is well documented.

At the same time, it is clear that while market conditions may

signal that a technological advance, if achieved, would be desirable

and profitable, that advance is not going to be achieved unless

technological and scientific capabilities permit. Technological and

scientific prospects for success not only limit what can be achieved,

they also may limit the amount of effort that goes into trying to advance particular technologies. Thus, the surge of research and

development in the field of computation during the 1950s and 1960s

surely reflected not only the strong market, but also the awareness

that major technological advances had become possible (largely as

a result of the revolution in semiconductors).

The slim available evidence suggests, however, that effects

of changes in the pattern of demand for products, and changes in scientific and technological capabilities, are not symmetric. Increases in the payoff for certain kinds of invention lead to increases in resources allocated to achieving them, and through

that mechanism, to a faster pace of technological progress. Changes in scientific and technological capabilities, on the other

hand, lead to changes in the character and quality of the

technological advances, but not necessarily to any significant

increase in R&D efforts aimed at advancing the technology.

Other economists focused their research on the nature of the economic institutions which generate inventions. Economists,

and other scholars, documented significant change over the 20th

century in the role of organized R&D efforts in business firms,

73
relative to private free-lance inventors, in the generation of inventions. There has been a significant increase in the fraction of patents assigned to companies, and a parallel decrease in patents

assigned to individual inventors. However, there are some

interesting differences between industries and fields. Other scholars focused on the changing roles of different sizes of business firms in invention and innovation. Much of that work was guided by what might be called the "Schumpeterian"

hypothesis that, by the mid-20th century, large firms with organized

R&D efforts had become the principal source of major new

technologies. Suffice it to say that, in its boldly stated form, the

Schumpeterian hypothesis is much too simple. There indeed are some industries in which R&D on the core systems now is very

expensive, and only very large companies can and do afford to do

that work. This is the case with respect to large airliners since World

War II, pharmaceuticals since the 1960s and probably large

computer systems since that time. However, in a number of technologically progressive industries new or small established firms

have made significant contributions, even in the post-World War II era. Small firms were important sources of technological

advancement in the early days of the semiconductor industry, for example. Several scholars have put forth the hypothesis that, when

a technology is new, new entrants and small firms tend to be the

most important sources of new ideas, and new designs. As the technology matures, experience accumulates, and becomes more

important, as economies of scale are progressively exploited in production, greater resources are required to do effective R&D, and

large firms become more important. One wonders if this is what is going on in the semiconductor industry.

Other scholars have focused on the nature of competition in industries where technological advance is rapid. One outcome of

this research has been to cast doubt on the theory behind the

productivity growth studies. In particular, the basic logic of technological advance in capitalist economies implies that, even

within an industry, firms are going to differ in the technologies they

use. Indeed, product and process innovation is the prime

competitive weapon in technologically progressive industries, and in such industries the gap in technology between the leader and the

lagger is what yields the return on R&D to the former. This essential

diversity among firms is repressed in models which are based on

the idea of an industry or economy-wide production function, which

shifts as a result of technological advancement. Absorbing this "neutrino" into the corpus of economic theory is likely to require

considerably more modification of that theory than economists

earlier thought, or than many now admit.

The view of the technological change process that gradually

has emerged from these, and other studies, is one that highlights

very considerable uncertainty at any time regarding which

technological options are going to be the most fruitful ones to

74
pursue, and usually considerable disagreement among

knowledgeable individuals regarding that matter. As a consequence,

in broad fields where successful innovation is profitable, one

observes a considerable diversity of R&D efforts by firms. Some lay

their bets one way, some lay their bets another way. Some win, some lose. A variety of studies have shown that successfully

innovating firms are more profitable, and grow faster, than their

rivals. The processes going on have a number of features akin to evolutionary processes in biology. There are some key differences,

of course. In the first place, inventive activity is much more

purposefully directed than is mutation, but invention does share with

mutation a significant stochastic element. In the second place,

selection forces work not only by means of expansion of the fitter (firms with the better technologies) but also through conscious

imitation by other firms. Taking account the differences, as well as

the similarities, it would seem fruitful to try to model technological

advancement and productivity growth as an evolutionary process.

Several economists now are at work developing models of this sort.

It should be apparent that the basic conceptions behind

these evolutionary models are at tension with those behind the mid1950s models of productivity growth and technological

advancement which regenerated economists interests in those

subjects. Like the analogy in physics, the economists' effort to pin

down and observe the neutrino of technological advancement have

led to recognition of deep difficulties with the original theoretical

formulation. It will take some time to work these out. From an evolutionary perspective, and consistent with

virtually all of the historical studies of technological advancement in various industries, technological advancement is an experimental

process and, with the vision of hindsight, a wasteful one. Many of the alternatives explored turn out to be dead ends; it surely would

have been more efficient to have early in the game found the routes

that turned out to be the most fruitful ones and have concentrated on them. The competitive processes which stimulate R&D and

industrial innovation also contribute to the inefficiencies involved. In some cases there are races among firms to reach a technology first, races which surely both involve the wastes of duplicate efforts, and

the wastes of undue haste. The property rights associated with

patents, and with industrial secrecy, which in some industries

provide much of the spur to innovation, also lead to incentives for firms to try to develop new technologies which are unlikely to be

better than the best available technologies, if the latter are blocked

by patents or secrecy. The inefficiencies in the current system are easier to see, and analyze, than to resolve. While the best way may be easy to observe after the fact, before the fact the uncertainties are real, and

a diversified portfolio is called for. While the diversified portfolio

generated by competition among business firms is far from a

75
planner's ideal, given what is known about comprehensive planning

systems, market pluralism may be our best available protector of

diversity.

The discussion above by no means implies that the Federal

Government cannot and should not play a significant role in industrial innovation. It can, and it has. I turn now to reviewing some

of that experience.

The Role of Government in Industrial R&D

As I remarked at the beginning of this paper, the last few

years have been marked by a wide ranging discussion about the

fruitful roles that the government might play in stimulating industrial innovation. The next few years are likely to see a drawing back, an

attempt to delineate quite narrowly what governments should do,

and what should be left largely or totally to business initiative. A

narrowly constructed governmental mandate likely would follow the

following lines.

First, the government certainly ought to assure a general

business climate, and a legal framework, within which innovation by

business is profitable and is stimulated. Care should be taken that tax and patent law and policy, and antitrust policy, be supportive, not hindering, of innovation. Under this general banner also march

the arguments that inflation and heavy-handed regulation are major

enemies of industrial innovation. Second, the government has a mandate for the support of basic scientific research. Such research

is not proprietary and in general it is not profitable for business firms

to undertake much of it. Third, the government also must support, or draw forth from the private sector, R&D relevant to public sector needs. Aside from these three basic roles, the government should

stay out of the industrial innovation business.

It sounds clean, but it is too simple. No clean line can be

drawn between special tax treatment of business R&D, and subsidy

of R&D. Is a sheltered market part of a supportive environment for R&D? If so, how is that to be distinguished from preferential

procurement or R&D subsidy? The attempt to fence off government

R&D funding responsibilities into one field called basic research and

another field called public sector R&D provides less guidance than one would think because the boundaries of those fields are so

shady. Those who work at the National Bureau of Standards

certainly recognize the haziness of the line between the kind of research which is rightly treated as public, publishable, and to be

supported by government, and that which can be treated as

proprietary, and outside the appropriate realm of government

funding. Research on the properties of materials falls squarely in the

shady region. A central fact is that, where we draw the line between

public research, and proprietary research, is a matter of policy, not something dictated by the nature of the matter. Similarly, the lines between public and private sector needs are impossible to draw

cleanly. The standard case is overlap. Aircraft, computers,

76
medicine, buildings, are inputs into both private and public sector

activities.The narrow view of government's role sketched above also seems to rest on the belief that where government has gone

beyond those narrow limits, and engaged itself in active support of stimulus of industrial R&D, it has botched the job. That simply is not

so. I want to call attention to the fact that, historically at least, active

federal direct and indirect support of R&D in a particular industry

often has been very effective. In what follows, I shall be reporting

from a collection of industry case studies of the evolution of technology and the role of government policy. The studies were done under the auspices of the Center for Science and Technology

Policy at New York University, and were supported by NASA.

In agriculture (or rather farming), since the third quarter of the 19th century, the Federal Government has played an important

role in supporting R&D. Much of this work has been done at experimental stations of the land grant colleges and universities,

with federal funds complemented by state funds. In general, public

monies and university R&D efforts have not gone into areas where

a strong private commercial design or R&D capability existed. Thus,

the university engineering departments and experimentation stations

have not tried to preempt tractor or farm implement development. In some cases, a division of labor between the university effort and

commercial effort has been worked out, as in the case of hybrid

seeds, with the universities doing the more basic work and the

private companies doing the proprietary work. Various studies have

shown public R&D in agriculture to have been an important

contributor to the rapid productivity growth experienced there, and

to have yielded a very high rate of return. Another area where a reasonably well established division of labor between universities, financed by government, and private

commercial R&D has been worked out is pharmaceuticals. Here the

National Institutes of Health has concentrated on the basic

biological studies. However it also has engaged in more applied

work, including the development of pharmaceuticals, for disease

categories where the markets are not deemed large enough to attract sufficient commercial interest. Cancer chemotherapy is a prominent example. There is some disagreement about the relative importance of the publicly supported work, and the work of the large

pharmaceutical companies. But just about everybody agrees that over the long run the basic research support of the National

Institutes of Health to enable better understanding of disease, and

health, and of how various chemicals and other substances work in the body, is going to be extremely important to the evolution of the next generation of pharmaceuticals.

The Federal Government's role in the evolution of civil aviation is another interesting story. In my judgment at least, the

aborted effort of the Federal Government to subsidize the

development of a supersonic transport was a serious mistake, and a

77
good example of federal R&D support gone wrong. In contrast, the

program supported under the National Advisory Commission on

Aeronautics during the 1920s and 1930s, which provided

significantly increased understanding of airplane design principles, was right on the mark. Several studies have testified as to the

importance of this federal program in the evolution of the modern

commercial airliner during the 1930s. And, of course, the modern

jetliner owes considerably to Department of Defense R&D support

and procurement of military aircraft. Technology in semiconductors, and computers, also was

strongly influenced by the federal interest in these technologies in their early days, including R&D support, and (later) procurement. In both of these industries, the government in effect "made" the early

market. As these industries and technologies matured, the civilian part of the business ultimately grew sufficiently so that the

companies' own efforts began to pick up the lion's share of the

R&D burden. Of course the future federal role in the evolution of semiconductor technology is right now a hot issue.

As the foregoing discussion indicates, it simply is not true that the Federal Government always has been clumsy when it has

tried to support the evolution of a technology. There have been

unfortunate instances. The supersonic transport episode was one.

Project Breakthrough (aimed at improving technology in residential

construction) also clearly was a failure. However, the reading of that case I draw from the study in our collection is that the problems

there, to a considerable extent, were administrative and political,

and that no real test was made of the proposition that federal

support could significantly improve housing technology. In agriculture, pharmaceuticals, civil aviation, computers, and

semiconductors, the government's role has been powerful, and

fruitful. What are the circumstances under which government R&D

support can be fruitful? Let me, drawing on past experience,

suggest three different kinds of conditions.

First, the government can play an effective role in supporting, or even undertaking, R&D in industries where the firms are small, not in rivalrous competition with each other, and there is not a set of supplying industries with vested interests in particular

ways of doing things. This description fits agriculture. It fits housing

worse, largely because of the presence of a variety of supplying

industries with particular parochial interests. As suggested above,

however, my reading of the Project Breakthrough fiasco is that government ineptness, more than supplier resistance, caused the

trouble. Government R&D support can be fruitful where it is possible

to establish a line (however shady) between proprietary R&D, and

nonproprietary R&D, and important knowledge can be gained from

the latter. This has been the situation regarding pharmaceuticals.

The recently established cooperative automotive research program

78
was a new attempt along these lines. And, of course, this is an area where the National Bureau of Standards long has worked.

Third, where there is a widely recognized legitimate public

interest in the evolution of a particular technology, for example a

national security interest, then the government can be aggressive,

informed, and effective regarding applied research and development

aimed at public objectives. As the experiences regarding computers

and semiconductors indicate, what companies learn through their public sector oriented R&D efforts can greatly strengthen their

civilian technology capabilities.

I make these suggestions not in advocacy of any particular

policies, or to suggest that the apparent instinct of the Reagan

administration is to back off from the new departures of the past few

years, is necessarily a bad thing. But, I do think it important to clear the air of the belief that the record of the Federal Government

in its effort to stimulate industrial innovation is, uniformly, a bad one. There are many clear examples of considerable success.

Furthermore, in looking at the successes and failures, it is possible

to identify the kinds of conditions, and the kinds of programs, where

government efforts have proved effective. This should be useful information when, sometime in the near future, the climate turns most favorable towards active government policies.

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