No Science, No Startups: The Innovation Engine We're Switching Off
143 comments
·October 13, 2025terminalshort
twobitshifter
Not why it can’t be done so much as why it isn’t done. Share buybacks allow companies to reward executives directly as their compensation is tied to stock price. If we started not doing that, the priorities might shift, but those executives like things the way they are.
Before Tim Cook Apple had never done a buyback - Jobs was always thinking Apple could do better with the money in R&D than paying off shareholders. Wall Street did not approve of this position, but Jobs wasn’t one to listen to anybody, so it did not matter. Most CEOs are not going to take such a strong position when they, the stockholders, and every other executive can be guaranteed a financial reward through a buyback.
terminalshort
If companies want to reward executives directly they can cut out shareholders entirely and pay salaries and bonuses. If companies want to reward shareholders (including executives) they can pay dividends (which Apple did do under Jobs). Nothing about the priorities of companies changed with share buybacks.
helsinkiandrew
> Share buybacks allow companies to reward executives directly as their compensation is tied to stock price.
To be fair share owners also like the stock price to go higher, they also like dividends (and higher dividends would tend to drive the stock price higher too), but an X% increase in share price caused by buybacks is favoured over an X% dividend because it isn’t immediately taxed.
skeeter2020
with everything at record highs we'll see if we continue to prefer inflated share price over reinvestment in the business or increased dividends.
cgh
Also, I believe in the US ordinary dividends are taxed at the income tax rate which is much higher than the capital gains rate.
null
bulletsvshumans
But dividends also result in a concrete financial reward for all shareholders, yes?
triceratops
> all shareholders
That's the key phrase, they benefit all shareholders. Buybacks on the other hand only benefit the following shareholders:
1. those with regularly vesting stock options and stock grants - basically employees. For non-tech companies especially, this only means high-ranking employees
2. those who intend to sell - that is, soon-to-be-ex shareholders
3. those who borrow against their stock - typically high-net-worth individuals who own a lot of the stock
Stock buybacks are thus a non-egalitarian way to return profits. To reward all shareholders equally, pay dividends.
LunaSea
> But dividends also result in a concrete financial reward for all shareholders, yes?
Yes, but less because in many countries dividends are taxed more than selling shares after a share price increase.
insane_dreamer
dividends and capital gains are taxed differently
xixixao
Dumb maybe question: Why couldn’t the companies with excess profits just pay they employees more in salaries?
vladms
Companies are controlled by shareholders who appoint the board who appoint the CEO. If the CEO decides to pay employees more, the board will change him because shareholder put money to get money out, not to give to employees.
Companies can give "shares" to employees, which means excess profits can be made dividends out of which employees "touch a bit".
If you would have your own company (privately own and full control) you are of course free to share the excess profit as you see fit.
Edit: and of course, share buy back avoids some taxes that you must pay, which in other schemes would have to be paid.
aleph_minus_one
> Why couldn’t the companies with excess profits just pay they employees more in salaries?
They could, but why should they? Which advantage get the shareholders from this?
The only reason why a company with excess profits "should" pay the employees more is if
i) for a given role, the expected results of potential applicants varies a lot (i.e. the company has an incentive "to hire the best of the best")
ii) the market for these exceptional talents is tough (i.e. if the company does not hire the best, someone else will; additionally, if the company does not pay the employees really well, they will be poached)
Macha
That would not make the share price number go up, which in turn means it doesn't make the leadership's net worth number go up, which means the leadership won't make that choice.
ceejayoz
That would set a precedent they don’t want. Investors and the Federal government have little interest in labor gaining power.
nucleogenesis
The only people who matter are shareholders. Employees are a means to the end of making money for the owners of the company whether through stocks or other kinds of ownership.
triceratops
Why would they do that when they could pay shareholders and themselves?
nyeah
They could, but then they'd have to report lower profits by the same amount. I want to actually defend this though: Corporate profit is a very narrow measure, by design. It was never intended to capture how well the nation is doing.
insane_dreamer
they don't want to
the purpose of a company is to deliver maximum return to shareholders; if they're not doing that, then they're failing their fiduciary duty and the shareholders might try to force the company to change its ways
the shareholders want the money coming to them, not to the employees
(this is why the Public Benefit Corporation, "B-Corp" structure was invented, so that the company's stated purpose can be something other than simply generating value for its shareholders)
Uehreka
Unfortunately CEOs have to do buybacks at every opportunity, because otherwise shareholders will sue them for failing to maximize shareholder value.
> Jobs was always thinking Apple could do better with the money in R&D than paying off shareholders. Wall Street did not approve of this position, but Jobs wasn’t one to listen to anybody, so it did not matter.
(Head spins) wait what?! No! You’re not supposed to do that! If you fail to always maximize short term profits, people might start thinking CEOs actually have agency, and they won’t be able to hide behind the “maximizing shareholder value” excuse!
hyperpape
> shareholders will sue them for failing to maximize shareholder value
That's quite a bold claim. Do you have an example in which a company/CEO/board was sued specifically for not doing enough buybacks?
7thaccount
Nothing against research universities as good stuff does occur there, but it just seems like it was such a a huge loss seeing those corporate labs disappear. I think it helps to have scientists and engineers closer to the problem and who don't have to spend a huge amount of their time writing grants and training grad students.
cjbgkagh
Having worked in cooperate labs they really were great and it's a shame they're disappearing.
It's not only share buybacks, I would include offshoring, DEI, and a consolidation of management power as major factors in the destruction these labs. The pipeline has been so bad for so long now that it would take a miracle to get things started again.
The last org I worked at offshored the most promising work to China. Due to some high up international agreement the company had to spend $X on offshored workers so not only were they considered cheap they were considered free because the money had to be spent anyway and was coming out of someone else's budget.
I was working at a Research Org when the DEI push came through and it was a absolute disaster. A lot of projects ended their internship programs and avoided hiring in order to minimize the exposure. The bargain was always, you can have 6 seats but 50% need to be women and 50% need to be minorities, and since everyone got the push at the same time it meant that due to the intense competition for the same people you'd end up really having to scrape the bottom of the barrel. That made a lot of initiatives unviable.
I wasn't working at Yahoo Research but as I heard it was canned following a management rift. They were already bleeding talent for a while but had retained some good people that stayed out of comfort and inertia. The smart people cultivated in research orgs tend to be a competing source of power and management hates that.
fkyoureadthedoc
I'm not really seeing how the blacks and women ruined corporate research, can you expand on that more? Are you saying they were all retarded and without enough white, Asian, and Indian men nothing could be accomplished?
terminalshort
And you can have a career track that normal people will actually want. The whole phd -> postdoc -> (maybe) tenured professor thing is such misery that I never even gave it a thought as a career.
moffkalast
Yeah if you go check almost any major scientific breakthrough of the past century it usually starts with "some guy was working in a corporate lab with an unlimited budget". We're stagnating as a species a lot more, but at least the shareholders got a payout for their hard work of doing literally nothing. Rent seeking at its worst.
ModernMech
> it was such a a huge loss seeing those corporate labs disappear.
A loss for whom? Society? Of course, and that's exactly why they don't happen anymore -- because while they were a boon for society they were a terrible bet for the company. And when a company has a choice between doing good for their bottom line or doing good for society, 100% of the time they choose their bottom line.
I mean, look at the legacy of Xerox Parc from Xerox's perspective. They invited this guy in, Steve Jobs, and he commercialized their ideas. Today Xerox is worth pennies on the dollar compared to their height, doing none of what Xerox Parc researched. Apple ate their lunch. The ROI for Xerox Parc was terrible for Xerox.
For all the amazing stuff they did, they were not rewarded by the marketplace for it, they didn't produce better products for themselves, they just did other companies' R&D.
That's where Universities come in, and where they are vital. If you take them our, their role will not be filled by corporations, because they can't stomach the kind of dollars needed to do fundamental research. Only the government can stomach that, and if somehow the voters are convinced all this isn't worth funding, it just won't happen at any level.
intalentive
I read "stock buybacks in 1982" as shorthand for "financialization and short-term thinking at the expense of long-term gains", which certainly happened across corporate America and Britain starting with Reagan and Thatcher.
terminalshort
You state that as if it is a fact, but from what I see the tech industry has engaged in the longest term corporate strategies I have ever seen. Amazon took losses for the better part of two decades before it showed a profit, and public markets would never even fund a venture like SpaceX.
TheOtherHobbes
In tech it was the switch from creative corporatism, which is focused on opportunities, invention, and infrastructure, to extractive corporatism and oligarchy, which are focused on scams, exploitation, and the creation of rigid hierarchies of privilege.
We're now in the end stage of the latter in the US.
The US still plays at invention - or rather a few of its oligarchs do - but it's far, far behind what's happening in other countries.
dkyc
It's not even clear that the premise is true. There's lots of 'research' done in the big tech companies.
The biggest reason why companies don't seek to emulate "Dupont, Bell Labs, IBM, AT&T, Xerox, Kodak, GE", is probably that it reads like a list of textbox examples of "companies that failed to execute on their research findings", so clearly there was something wrong with this approach.
_aavaa_
That isn’t what they’re textbooks examples of.
GE (under Jack Welch specifically) is a textbook example of how financialization and focusing on numbers at the expense of products destroys companies.
Kodak is a textbook example of disruption. Yes they failed to capitalize on digital cameras specifically, but their research in all other areas was very much acted upon.
ActorNightly
The bigger problem today is that there is simply nothing more left to research. Everything that is being worked on are at most optimizations, which allways have a dollar spent vs dollar returned amount on them.
null
convolvatron
that patently ridiculous, we're just getting started
graycat
It can appear that some famous companies pursue pure research as a source of public luster.
oblio
Xerox and Kodak, at least, stumbled into the future and then refused it.
The same thing will happen to Google & co.
And DuPont is very much alive doing DuPont things.
cloverich
My mental model as an outsider, is the vibe out of Google is that they push the most talented folks out via process / politics. Not intentionally, just the reality of squeezing the creative type employee / work. Replacing creative smarts which is difficult or impossible to measure, with operational smarts, more easily measured. Those creative smart people mostly go on to start up other companies.
Its worked out ok for Google and others, because there's little teeth to anti monopoly, so all the big tech players can just buy the successes, which is safer than trying to grow them (esp. once the talent left). I really have no idea if this is an accurate take as its mostly vibes, sans for a few of said smart Google folks I've met in startup land(s). Yet Google is so big, they could bleed all kinds of employees telling all kinds of stories and it could all be simply random. Yet at the same time I can't help but think about every aging tech companies biggest / best products being via acquisition.
While I think monopoly is bad, I don't know if ^ otherwise is so bad. Maybe its just creative type folks _should_ avoid big tech, and build their own labs. Capital and compute are readily available to people who can demonstrate success, and its easier than ever to build and experiment in some fields. i.e. if we had stricter capital accumulation associated taxes, maybe the ills of this process wouldn't be so bad.
bayindirh
...and there's 3M and Würth.
dzonga
share buybacks are sort of a voting mechanism - it shows the company has no other uses for the money than to reward shareholders - hence pumping stock price up.
if the company has a vision - then reinvesting that money into research or what else is better. it might reap the benefits, it might not.
companies use buybacks if they can't do anything productive with the money - Apple is a recent example.
terminalshort
And before buybacks they used distributions, which have always been allowed, so there has been no change there.
photochemsyn
The article doesn't mention that Bayh-Dole made it legal for a university to exclusively license a patent generated by a government-financed researcher to a corporation.
Prior to this, if a corporation wanted to have exclusive rights to basic patents, they'd have to run their own private research labs to generate those patents. Prior to Bayh-Dole, university inventions were patented but there were no exclusive licensing deals. This means no competitive advantage; anyone can use license the patents (I believe any US citizen) before Bayh-Dole.
So corporations largely stopped funding private research labs like Bell and instead entered into public-private partnerships; on the academic side we saw the rise of the shady enterpreneurial researcher whose business plan was to use government funds to generate patents (not uncommonly based on fraudulent research) which formed the basis of a start-up which was sold to a major corporation.
The fix is simple: patents generated with taxpayer dollars at American universities should be available to any American citizen for a small licensing fee; if people want exclusive rights to patents, they need to put up the capital for the research institution themselves, as was the case with Bell Labs. Practically, this starts with a repeal of Bayh-Dole.
null
terminalshort
This sounds like a much more reasonable explanation for the fall of the corporate labs.
mike_hearn
> So corporations largely stopped funding private research labs like Bell and instead entered into public-private partnerships
They didn't though. Bayh-Dole was 1980. All the big tech firms have invested massively in R&D since then, and I think it's also true for many non-tech industries or tech-adjacent (e.g. chip manufacturing, oil and gas).
wbl
Repealing Bayh-Dole is a terrible idea. A lot of research produces enough to get a patent but still requires a lot more development to get a product. Drugs are probably the best example.
null
insane_dreamer
> I'm not seeing how you get from share buybacks to a shift in priorities in corporate research.
pretty easily: stock buybacks allow you to directly reward executives and funnel profits back to shareholders (by increasing share prices), making the company appear more valuable (further driving investment)
research brings long-term benefits, and immediate outcomes don't show up in 10-Qs
fidotron
There's something odd in this argument. If you come at it from a Canadian perspective Canada seriously spent on neural network computer science when almost no one else did (many in AI considered the entire thing discredited and impossible), now the (financial) gains from that are almost entirely in a foreign country.
The US science establishment was all about buying and utilizing Russian rocket engines until he-that-shall-not-be-named came along. SpaceX took the breakthroughs that existed in the US in things like control theory, which the same science establishment had failed to value appropriately.
It doesn't look like the science establishments of any country are actually successfully feeding their innovation machines, or have done so for decades. Switching a non functioning system off does at least allow it to be replaced by something that risks doing things when something comes back.
Of course many pure scientists will, legitimately, argue that innovation isn't the point in the first place, and that is a far more solid point, but real academic diversity has been so destroyed by the global consensus making peer review process that much of their progress has effectively stalled.
unix_fan
I’m blind, and participate in a lot of research projects to create accessible technology, which are mostly done by universities. What I have noticed as a foreigner participating with US based universities is that, a lot of this research while very high-quality and very well done does not actually result in anything that the intended audience gets to use or experience. And a lot of this is due to the amount of red tape, as well as a lack of risk taking. This means that without trying to go commercial a lot of these projects end up shelved and many potential users simply never see the benefits.
titanomachy
Because talent and ideas move so easily between the US and Canada, any useful basic science that Canada comes up with will ultimately be monetized in the country with 10x the population, 15x the GDP, and 100x the stock market and VC funding depth.
This could start to change if present US hostility towards all things foreign results in a shift in investment and migration.
keenbrowne
Research is necessary but not sufficient. Also need access to capital (and eventually capital markets) and a sufficiently sophisticated legal framework/safety framework so you can enforce contracts at least most the time. Good research is just a vehicle for producing knowledge and talent.
nemomarx
How's China doing? They seem to have a lot of research going on that feeds into their manufacturing fairly quickly from the papers I hear about
PaulHoule
Notably China is a big country and Canada is a small country. If there is some innovation that is going to improve productivity globally by %X the amount of benefit that goes to China is always going to be bigger than the benefit that goes to Canada.
fidotron
China are certainly better at turning the results of research into products, whether that research was them or anyone else.
The canonical example here is 5G. Once again the US science establishment had the guy, he ends up doing the breakthroughs for polar coding, they failed to appreciate him, he left and ended up being funded by Huawei.
https://en.wikipedia.org/wiki/Erdal_Ar%C4%B1kan
The US science establishment isn't broken as an innovation engine because of Trump - it's because they're clearly rewarding the wrong things.
What isn't so clear is if Chinese science is creating Chinese startups. It may yet happen.
mplewis
"real academic diversity" is doing all your lifting here
TimorousBestie
It’s impossible to determine what the phrase is supposed to mean in context.
throw4847285
They seem to be opposed to peer review?
jleyank
If you want new disease treatments and cures, you need to fund applied science (using the aforementioned definitions). Follow-on compounds can almost be engineered, but finding novel targets and coming up with candidates is a research problem. And dealing with the side-effects that appear can flip back from engineering to science. The Ozempic class of compounds has done wonders driving research in obesity and (I think) addictive behaviours.
Bringing it to market requires money and management and luck. Many/most of the promising candidates fall out along the way.
ilamont
Universities spend ~$109 billion a year on research. ~$60 billion of that $109 billion comes from the National Institutes for Health (NIH) for biomedical research, National Science Foundation (NSF) for basic science, Department of War (DoW), Department of Energy (DOE), for energy/physics/nuclear, DARPA, NASA.
Let's talk about the other $49B.
I read or heard someplace that at many universities tuition paid by students in the social sciences is effectively subsidizing the STEM fields, as the history department or psychology professors are unlikely to require huge investments in new buildings, specialized equipment, etc., yet they pay the same tuition fees as STEM majors. Families/students paying full freight at a private university are looking at undergraduate degrees that cost $250k-$400k all in.
That can't be the whole picture, as money also flows from rich donors, corporate partnerships of various types, and at some schools such as MIT licensing fees.
It doesn't seem like tuition can keep growing at the rates that it has to make up the shortfall from government research cuts, but what about the other areas?
some_guy_nobel
Raising (already record high) tuitions that have far, far outpaced wages and inflation should be a last resort. You can start by cutting bloated admin, reduce fraudulent procurement/graft (e.g. the $700k Berkeley Chancellor's fence: https://www.cbsnews.com/sanfrancisco/news/700k-iron-fence-co...), vanity construction, study abroad admin budgets that dwarf actual student grants, and the executive compensation/perks by admin.
And this is just mentioning a sample of admin bloat, never mind the other areas.
echelon
> I read or heard someplace that at many universities tuition paid by students in the social sciences is effectively subsidizing the STEM fields
Diploma mill universities in my state are consolidating the smaller STEM universities and trade schools to build football and sports programs, gyms, and "lifestyle" amenities.
This university in particular [1] mints basket weaving degrees and has used consolidation to build sports programs [2] and lavish facilities for sports.
It's also been a revolving door of politician to high-ranking, high-compensation executive staff positions.
This university [3] has used funding to acquire properties from the state, such as the 1996 Olympic Stadium [4].
Neither of these universities does real, impactful research. The latter is ranked as an R1, but everyone at the "real" R1s in our state will tell you this is a fabrication. They're diploma mills and extract six figures from their student body. They turn this money into sports facilities and upper level faculty pay.
[1] https://en.wikipedia.org/wiki/Kennesaw_State_University
[2] https://en.wikipedia.org/wiki/Kennesaw_State_Owls_football
[3] https://en.wikipedia.org/wiki/Georgia_State_University
[4] https://en.wikipedia.org/wiki/Centennial_Olympic_Stadium
throwaway091025
Maybe we shouldn't have required 'kissing the ring' segments in every scientific grant proposal
fundad
The utter lack of self-awareness needed to post something like this now should humiliate them, of course it's a throwaway account.
j2kun
> Engineers design and build things on top of the discoveries of scientists
I agree with a lot in this post, but I think it's also worth mentioning how this is a two-way street. Practical considerations often drive theory research as much as the other way around.
sherinjosephroy
This is a really important topic. The argument that the shift from corporate research labs (Bell Labs, Xerox PARC, etc.) to stock buybacks killed basic science investment is compelling.
If the US is increasingly relying on universities for foundational research, and corporate R&D is only focused on short-term, applied projects, we're definitely running the innovation engine on fumes.
It’s hard to build the next trillion-dollar company if the core science wasn't funded 20 years ago.
constantcrying
>The argument that the shift from corporate research labs (Bell Labs, Xerox PARC, etc.) to stock buybacks killed basic science investment is compelling.
It is not compelling at all. The difference between dividends and share buybacks are not big enough to explain this at all. The argument is totally absurd, companies could always reward their shareholders with their profits.
Bell Labs did not end because of share buybacks, it ended because Bell was broken up and their free money printer did no longer exist.
>If the US is increasingly relying on universities for foundational research, and corporate R&D is only focused on short-term, applied projects, we're definitely running the innovation engine on fumes.
Why? This is just total nonsense. The only difference is the physical location of basic researchers. And that the government decides what to fund. That is literally it.
Basic university research is still funded by corporations. Only they are paying the money to the government, which then decides what to fund.
cjs_ac
> Countries that neglect science become dependent on those that don’t. U.S. post-WWII dominance came from basic science investments (OSRD, NSF, NIH, DOE labs). After WWII ended, the UK slashed science investment which allowed the U.S. to commercialize the British inventions made during the war.
> The Soviet Union’s collapse partly reflected failure to convert science into sustained innovation, during the same time that U.S. universities, startups and venture capital created Silicon Valley. Long-term military and economic advantage (nuclear weapons, GPS, AI) trace back to scientific research ecosystems.
The US has an extremely entrepreneurial culture, which is why Americans are so good at building innovative businesses. In the UK, money is seen as grubby and the class system has consistently placed barriers between those with ideas and those with money. Similarly, the Soviet Union struggled to make use of its innovators due to the strictures of central planning. Australia punches well above its weight in scientific research but is unwilling to engage in any economic activity other than digging rocks out of the ground and selling them to China.
So the idea that scientific research is a limiting factor in economic growth is not general; it's specific to the US and countries with that same entrepreneurial culture.
echan00
this is great except nobody who should read this article is reading it
fundad
The people who should read this article and won't are actually an anti-growth movement. The silicon valley bros I work with are lapping up the sabotage because they want a lower standard of living in America and less science and innovation because they are already comfortable enough. Their sites are set only on the short-term gains of anti-Muslim and anti-abortion sentiment and "though talk" on immigration. Results are not that important. They claim that there would be enough funding if universities funded it with their endowments.
The anti-government sentiment is frankly anti-American. Even the ones who are naturalized don't know the basics about how ballots are validated ("If my wife vote with a provisional ballot, couldn't just anybody?"). I thought there was some testing for naturalization but it must be easy to cheat.
Anyone who convinced themselves that "economic anxiety" was actually a thing should talk to any MAGA or "centrists" about the present state of the economy.
jldugger
This seems quite adjacent to today's Nobel Prize announcement that sustained growth comes from understanding why an innovation works, so we can apply it in new domains.
rthrfrd
Startup = disruption = threat to existing control.
If you love control and have control, why would you want to create fertile ground for startups?
(This was meant as devil's advocate, not my personal point of view).
aeonik
That's short term thinking.
You can't stop innovation across the planet, you will lose control over time as adversaries continue to innovate and subsume antiquated control structures.
Larrikin
All the people in charge currently are banking on being rich, enjoying society as they have made it, and then dead before it personally affects them.
dexwiz
I dunno about the last part. Rich people under 60 seem to be under the impression they might live forever, either biologically or digitally. Within our lifetime we see people trying to make their digital twin their legal heir.
ninetyninenine
Nah it’s more complicated than that. They need to lie to themselves first. They need to build a scaffold of logic that proves and justifies there actions before they do it.
Hitler for example thought he was justified. And so do all the people who claim global warming isn’t real.
ortusdux
Everything that is happening in the US screams short term thinking. It feels like the scramble after a leveraged buyout.
bluecalm
Currently the biggest US companies are throwing hundreds of billions into an uncertain bet that may pay off in a decade or so while everyone around is screaming "bubble" at them.
It looks like long term risky bet on new technology to me - exactly what you want those rich capitalist do.
teeray
> That's short term thinking.
Which is exactly what our system encourages. You don’t need to think beyond the next quarter / election cycle. You’re only in it to extract as much wealth in the short-term as possible and secure your chair before the music stops playing.
api
Yet it’s a mistake companies and societies repeatedly make, because human brains are wired for zero sum games and paranoia. When you have it, the instinct is to clutch and guard and hoard not grow and expand.
When a company or a society is threatened the usual response is to double down on things that accelerate decline like killing novelty and innovation.
These things worked when we were small primates fighting over limited food sources on the savannah. Our brain stems don’t know what millennium they are in and still run those programs.
rthrfrd
Oh I completely agree.
null
> In the 20th century, U.S. companies put their excess profits into corporate research labs. Basic research in the U.S. was done in at Dupont, Bell Labs, IBM, AT&T, Xerox, Kodak, GE, et al. This changed in 1982, when the Securities and Exchange Commission ruled that it was legal for companies to buy their own stock (reducing the number of shares available to the public and inflating their stock price.) Very quickly Basic Science in corporate research all but disappeared. Companies focused on Applied Research to maximize shareholder value. In its place, Theory and Basic research is now done in research universities.
I'm not seeing how you get from share buybacks to a shift in priorities in corporate research. If there's a fundamental reason why it can't be done now how it was before the 80's it's not that.