The Rising Returns to R&D: Ideas Are Not Getting Harder to Find
13 comments
·August 14, 2025mensetmanusman
If the OECD is to be believed, the elephant in the room is that China negated the value of western R&D by about $500B per year since 2010.
That’s why being a fast follower is so valuable, you get everyone else to waste money on the wrong ways to build things. It also causes R&D to show much worse returns.
exasperaited
> That’s why being a fast follower is so valuable, you get everyone else to waste money on the wrong ways to build things. It also causes R&D to show much worse returns.
Frankly I think this is the big cultural change in tech generally, isn't it? People come up with ideas and everyone goes "oh I want to do that", so they replicate it off the back of the work everyone else has done. Uncritical FOMO.
But actually it's better to be an even slower follower, generally, as a survivor strategy. Apple and Nintendo shows this. It's better to go "I see what they are all doing, and I see where they think consumers are, but I think they are wrong, and I think it's not just a question of them going about it wrong, but that all of this evidence suggests consumers actually wish they were getting this other thing, and that is what we should build".
shakow
This works for Apple & Nintendo because they built their brand image while being fast-followers – and even pioneers decades ago (the Apple ][ was among the trailblazers, just like the GameBoy or the (S)NES).
I would bet that a company trying to replicate that strategy without the previously established brand image would not go very far.
moron4hire
Apple and Nintendo have some of the strongest brand loyalty this side of macrobrewed beer and sports teams. They can afford to go against the current because they have extremely deep barrels of fanatics who will buy just about anything they make, regardless of whether it's cutting edge or not.
moomin
Checking I understand this right: the paper’s contention is that more R&D, whilst still producing productivity gains, is invalidating gains made from other R@D? e.g. everyone developing their own LLM. It’s an interesting idea, but why would that be happening?
JSR_FDED
They are specifically looking at R&D in Manufacturing. I think there you can make the case (as they do) that one new innovation can erase the productivity benefits of a prior innovation.
woopwoop
I do not, and have never, understood why absolute R&D investment is compared to relative growth rate in this literature. It would make sense to compare R&D spending as a percentage of GDP to relative growth, or to compare absolute R&D spending to absolute per-year growth, but I remain mystified by the comparison of absolute R&D spending with relative growth.
ethan_smith
The comparison makes sense in endogenous growth theory where knowledge production has a Cobb-Douglas form - doubling researchers should double the absolute ideas produced, which translates to a constant growth rate under standard assumptions about how ideas affect production.
zw123456
I am writing a book about this topic. I started my career in 1978 at Bell Labs and worked in 3 different startups after that. After 45 years in R&D, I have recently retired. So many times, the inspiration for new inventions we worked on came from unexpected sources; the arts, culture, music, history and many other sources. And I said we on purpose because rarely did a new invention come from one person, it was almost always from collaboration on a team. My conclusion is that invention so often comes from a team of well rounded people with knowledge in many areas and the ability to work in a team. I wonder if the decline in the productivity in R&D comes from a decline in these attributes?
user3939382
If anyone needs ideas I have about 10 per day
hn_acc1
Got anywhere you're willing to write them down? I'm like your reverse twin - I never have ideas I think are commercially viable. But I think I'm a decent coder (30+ years of gainful employment in the Linux space).
CyanLite2
Their dataset only runs up to 2018?
They show R&D is effective and R&D spending is up, and conclude obsolescence must be the reason this is not reflected in productivity pretty much by process of elimination. However there is an alternative - that for reasons unrelated to R&D, productivity is actually being driven down, and ever increasing R&D output is necessary just to maintain current levels of productivity.
In particular, they are looking at US manufacturing. While this is a diverse industry, it's clear that in many subfields there is quite a bit of saturation. When everyone has a car, and cars last longer and longer, the need for new cars goes down. Once you get to a point where your industrial capacity can provide enough to satisfy demand, further R&D only reduces the costs of satisfying that demand, not increased output, and in some cases improvements to product quality may even further reduce demand. In the US, light vehicle sales peaked in 2000, and while the numbers dipped during various market downturns, they keep coming back to roughly the same asymptote. The numbers are even more striking if you break it down further - the annual demand for personal vehicles has fallen by a factor of 4 since 1965, and by a factor of 3 since 2000, the difference being made up by increased commercial vehicle demand. Looking at other industries like steel paints a similar picture.