Posted by chmaynard 1 day ago
is that i’m sure even the CEOs would rather live in a world with anesthesia, MRIs, wifi, gps, etc
yet they greedily prefer to personally gain money because they cannot see that they would be richer in a world with { what would be discovered if we had science }
it’s just that you cannot miss what you already don’t have, if they could only see what would be possible, what we could achieve, the would go nuts about how slow we are moving
There is also a tendency to overlook the fact that pursuing a PhD is a form of professional work, comparable in commitment and responsibility to other careers. Sometimes 699, sometimes 700. Academia can indeed be a challenging environment, and not everyone contributes in the same way—some may prioritize credentials over substance, and cases of research misconduct do exist. However, these examples definitely do not represent the academic community as a whole.
Regarding the venture-capital approach, in applied sciences, researchers are increasingly expected to present their ideas in short, pitch-style formats. At some point, this process itself becomes the goal of the work. I can imagine this encouraging concise communication. Still, it also shifts part of the management responsibilities—such as market analysis and outreach—onto scientists, which does not align with their core expertise or professional goals.
Which should only tell us what a cancer HR departments are. Filtering someone from talking to the hiring department, for the crime of doing a PhD, and telling others about it - to me this sounds more likely like someone getting a kick out of wielding the bit of power they have over others than a useful contribution to society.
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.
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.
This isn't right but it's adjacent.
Executives don't need buybacks to get whatever compensation. Their compensation is negotiated and you can write the contract to make it whatever.
However, paying dividends is a taxable event, which means shareholders don't like it. You have to pay the tax on the dividend immediately instead of when you sell the shares, even if you just use the money to buy more shares. Buybacks don't work like that unless you're the one who sells your shares in the buyback. Which you can be if you'd rather have the money immediately (and pay the tax) than de facto increase your holdings in the company.
If transferring money to shareholders as dividends forces them to realize taxable gains before they want to then they'd prefer the company keep the money and invest it in something internally instead. Buybacks give them away around that.
But that's not necessarily bad. The shareholders (the ones who sold their shares) get the money instead and then invest it in something else, ideally a different company so that the existing large company doesn't get even bigger.
Also, when the company keeps the money, it doesn't have to use it for R&D at all. Companies often use it to acquire other companies, which is the worst.
You don't really want a tax incentive to make big companies bigger.
We also used to enforce antitrust law.
I've been reading the Chernow biography of Rockefeller, and this simply isn't true. We've almost never enforced "anti-trust law", and it's basically never been particularly effective.
The Sherman Act was widely considered a failure (even after passage in 1890). It did little/nothing to affect the fate of Standard Oil, which actually grew for a decade after passage, to over 90% control of the market by 1904. This is despite the state of Ohio engaging in a much more successful legal attack, based on technicalities of the trust charter, having nothing to do with the federal law.
The thing that actually brought down Standard Oil was...competition. By the time the company was actually broken up in under the Sherman Act in 1911, it had declined to ~60% market share. The overall story is essentially the same as today: the law ends up being used to punish declining companies for prior bad behavior.
The first notable push-back on that state of affairs was Lina Khan under Biden, who ever so slightly course-corrected us back toward healthy market competition in the tiniest of ways, and every business bro reacted like she was committing mass murder. Meanwhile, we need that times ten for at least a decade just to get us back to something resembling functioning markets. At this point I doubt we'll see a shift back toward reasonable market regulation... ever. Plutocrat capture of the levers of power is so complete that the only way I expect the US to see serious anti-trust action ever again is as a tool of corruption.
Shareholders love dividends because it is taxed as capital gains ( long-term capital gains if you own the stock longer than 1 year ). It's why most of the publicly listed stock ( of profitable companies ) pay dividends - because shareholders want dividends. Apple was forced to pay dividends by investors. So was Meta. As was Alphabet. All under shareholder pressure because dividends get tax as capital gains. Any company sitting on a pile of cash will get pressure to pay it out as dividends by shareholders.
It's much better to have the company buy shares back. That way the stock price goes up. You then only face the tax event once you sell the stock later in the future. So you just avoided a tax event.
The reason for dividends is that pension funds and the like do like dividends for whatever reasons.
Individual investors and people who have a long term approach like Warren Buffet are against dividends.
All of the whims that go into the market price are still there. If you're a shareholder who doesn't care about the share price you're going to have a bad time.
> It also forces a certain discipline in the company, since shareholders don't like dividends getting cut.
Which usually leads to mismanagement more than anything because the company gets into a situation where they should lower the dividend but is under pressure not to and then starts eating their seed corn so they can still pay the dividend.
> It also limits empire-building, di-worsification, and "good ideas" that have questionable ROI.
Buybacks do the same thing.
Turns out Jobs was right, relevant article from 2006:
https://appleinsider.com/articles/06/01/16/apples_jobs_says_...
From TFA:
> pushed the company's market capitalization to $72.13 billion
This, on annual revenue of ~$19B.
Apple today is closing in on 2x that revenue every month now. Quarterly net profit exceeds annual revenue in 2006. The Apple Watch group is roughly half the size of the whole company in 2006.
At some point, it became clear that the business throws off vastly more cash than can be productively used in R&D (here I will note that Apple's recent profit gusher is already net of investments in things like the Titan car project, Vision, and all the other stuff they work on but never release).
Of course, I'm being a bit pejorative, they aren't thinking big picture at all, just concerned with what happens tomorrow not the day after...
However, they are in part responsible for the nonsense happening at the moment wrt to American policy, it seems like a game who can light cash on fire the fastest ..
If one looks at US money printing in the past two decades, they'll find that the S&P's gains are basically just a mirror to the increased injection of dollars, a facade made to prop up the market. There really has been no actual growth compared to like Japan in the 1980s or China and India in the early 2000s, or Vietnam today. Just a few companies, mostly in tech, which are propping up the rest of the market.
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.
Still, they're taxed, whereas buybacks allow the shareholders to control exactly when they take income.
Also buybacks will tend to select for frequently traded shares with high cost basis, further reducing total taxes and selecting for longer term shareholders. They really are just better than dividends in every way.
They can however signal 'strength' in stock price by creating more demand and signalling to the market that the company itself which has 'insider information' believes the stock price is worth less than the price they're bought for.
It's a fair point about Jobs - but - Jobs was never sitting on more money than the economies of most nations.
Jobs Apple was a consumer product company, Tim Cook Apple is a Private Equity Operating Entity in a way. Their financial operations dictate as much about their valuation as anything else.
Putting in a finance/ops person as the CEO will stagnate a company from a product standpoint.
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.
I’m just not following the connections here.
It seems like your assumption is that a stock buyback is a short term gain.
One of your arguments is that the strike price for options is set based on a certain amount of stock in circulation, and decreasing that amount will “artificially” raise the stock price, making the options more valuable. I agree that higher stock price benefits those with options, and I would even agree that it is possible that when those strike prices were valued, the valuation did not take into account the possible global change in the amount of stock (although a market would have included this valuation).
I suppose the other part of the argument could be that R&D is good for the stock in the long term in a way that stock buybacks are not… the buybacks pumping up the price of the stock before it is driven into the dirt by competitors who do invest in R&D.
There, I’ve done my best for your argument but I still don’t really believe that increased stock prices for everyone is not benefiting everyone more or less equally.
My argument is a stock buyback isn't a gain for a long-term, buy-and-hold investor. Unless
a) they sell some of the stock or
b) it pays dividends
they don't see the benefit of a higher stock price or reduced share count.
Qualified dividends and long term capital gains are taxed at the same rate. So anyone who says "buybacks are more tax-advantaged" is leaving out the second part: "because you can borrow against a higher stock price without paying taxes". Since most (non-rich) people don't do that stock buybacks have the same tax (dis)advantage as dividends. If you know of a way to get tax-free money out of a higher stock price other than borrowing on margin, please tell me. I'd love to learn.
> decreasing that amount will “artificially” raise the stock price
It isn't "artificial". There are fewer shares in circulation/more demand for the shares. That legitimately translates into a higher price. But stock options and grants are generally given to employees and especially executives. So a reduced share count and higher share price is particularly good for them.
> One of your arguments is that the strike price for options is set based on a certain amount of stock in circulation
My argument was more that when employees are paid a significant portion of their compensation in stock they tend to sell much of it upon vest (sensibly) in order to diversify or even just to pay their bills. Ergo, being frequent sellers, they benefit from the higher stock price more than they would from regular dividend payments. A higher stock price directly translates into higher compensation. Wouldn't this be a powerful incentive for company management to prefer buybacks over dividends?
> I suppose the other part of the argument could be that R&D is good for the stock in the long term
I didn't say anything about R&D spending. A company should return as much profit to shareholders as it sees fit.
I was rebutting the common, I believe simple-minded, argument that buybacks and dividends are completely equivalent. Even though the company spends the same amount of money, I think they are different in some very significant ways.
Buybacks can be good or bad for shareholders, depending on the buyback price.
Example. I take $1000 and securitize it as 1000 shares. The company sells the shares for $1 each. This is a no-fee closed fund, whatever. I'm the "CEO". I personally buy 1 share.
Anyway, one day the stock trades at $0.90 and the company buys back 500 shares at that price. (How $0.90? Maybe the largest shareholder was distressed and needed cash, maybe somebody didn't read the SEC filings. Maybe "the ticker tells the whole story" and the ticker told $0.90 for a few days. It doesn't matter.) Now the company holds $550 and has 500 shares outstanding. Each share owns $1.10 of USD. Expenses are zero. I kindly volunteer my services as CEO and sole employee.
Pretty soon the stock might trade around $1.10. (Why $1.10? wHo knows?) The people who sold for $0.90 might regret that decision now. Continuing shareholders make money if they sell now. Was this "good for shareholders"? Depends on which shareholder.
Now I (the CEO) decide the company will do a buyback. The company offers $2 a share. I sell my own share for $2. To make it simple, say the company buys back 275 shares at $2. Now it's broke. The remaining shares trade for ... whatever. Somewhere between $3 and $0? ($3 because growth rate!)
I personally doubled my investment. Anybody who sold at $2 also did well.
Buybacks can be good or bad for shareholders.
Share buybacks are always executed at the current market price. The company doesn't offer a higher price. A large buyback order might move the share price up a tiny bit but triggering an increase from $1 to $2 is impossible for any company traded on a major US exchange.
I'm not claiming the price jumped from $1.10 to $2 without hitting any intermediate prices. That's your idea.
If your point [about share price jumping suddenly] was irrelevant, then maybe you shouldn't have mentioned it. How is this my problem?
I see that you edited your previous comment before replying. Very clever. Now (12:03 Pacific) you have a company worth $1000 trading on a major stock exchange. Ok.
Maybe you can make a spreadsheet similar to what I described in words, but using more believable numbers. If so, you can see the kind of effects I'm talking about. Buybacks are good for some shareholders and bad for others. Buybacks can be used to reward management, though others will be affected (+ or -) at the same time.
Or maybe you won't/can't make that spreadsheet. Again not my problem.
But yes, of course it's a toy example. I should probably have made the buybacks drive the price from $1.10 to $1.20 or something, with a much smaller reward for the founder & CEO. I got bored and kept it simple. (Or I got greedy for that $1 profit, maybe.)
All the working parts of the example are on display. You can make other examples that seem better to you.
You may well be offended because we were rude to each other. That's fair. But you're not telling me to stop being a dick. You're telling me my ice cream stand has to be listed on a major US stock exchange. That's not a strong argument, and it's not really on topic.
And, yes. I admit it. I'm a fanatical believer in the conspiracy theory that buybacks can be either good or bad for a given shareholder, and that this depends on the price paid for the shares, and on when each shareholder buys and sells. The system is rigged, I tell you! Rigged! .... but, er, ... sometimes it's rigged one way ... and ... sometimes, um, it's rigged the other way. You have to run the numbers. But it's RIGGED!
We good?
If they're continually investing/rebalancing then it benefits them the same way a dividend does, but with fewer tax consequences.
It's better for me as a long term investor because I can better control my tax liability. It also allows for long term growth without a tax drag until I'm ready to switch out of my accumulation phase.
NOTE: The commenter is explicitly basing his/her argument on his/her lack of understanding. That's what brought the subject into discussion.
But I'm not casting aspersions on the commenter. I'm responding directly to his implication that if he doesn't understand X then X is false. That's not a thing.
A stock buyback rewards all stockholders equally. Those who sell, get their reward in cash. Those who do not sell, get their reward in the proportion of their ownership of the company going up.
Buybacks of overpriced stocks also do not benefit investors.
If the buybacks are at a discount to whatever the stock turns out to have been worth at the time, then that benefits all the shareholders. That can be a great use of money for all shareholders.
But buybacks at inflated prices benefit only exiting shareholders. Exiting shareholders tend to include hired management. Of course nobody really knows the valuation that well, so obviously there's a guessing game.
This is pretty hard to argue against for anybody who agrees that valuation is a thing at all.
Buybacks increase the share price because you have a company that is worth (for sake of argument) the same as it was worth before, except now there are fewer shares available.
A fixed market cap divided by fewer shares equals a higher share price.
In the limit case imagine buying back all but 1 share. Now that 1 share represents the entire value of the company, so the share price would equal the market cap.
Markets tend to reward companies that use buybacks as there is a belief the buybacks are a demonstration of discipline by the management team. Conceptually COMPANIES SHOULD BUY BACK STOCK IF THEY DO NOT HAVE BETTER ROI PROJECTS IN THE PIPELINE. This frequently happens in mature industries.
As noted above, buybacks are another means to return cash to investors. Today, in the US, the tax rate on qualified dividends and long-term capital gains are equivalent for most shareholders. This has not always been the case. When tax rates for capital gains are lower than dividends, buybacks are a more efficient means to return capital to investors.
Buybacks also allow for more tax planning. When dividends are issued, the investors have to pay taxes on them at that time. Stock buybacks allow investors to choose when they want to pay taxes. They can sell into the buyback and pay taxes now or hold the stock and pay taxes at a later time.
Buybacks are can be part of normal corporate capitalization decisions - what is the appropriate debt to equity ratio for the company.
Finally, changing dividend levels has its own impact on stock price. If a company increases its dividend, them market expects it to remain increased. In this case the stock price goes up as investors expect more dividends in the future. When a company cuts its dividend (rare event), the stock price drops dramatically as the market punishes company not only for the reduced expectation of future dividends but also because companies only cut dividends when they are having severe problems. Some companines issue a special dividend related to a one-time event such as selling a division. The stock price does not do much in these events.
All of this is to say that stock buybacks are not why corporations reduced basic research investment. I was at GE watching the famous research centers getting cut. The bottom line was the research coming out of the centers was not creating a meaningful ROI. At one point the researchers went to the various GE businesses looking for projects where their expertise could add value - an internal consulting group. They gave up after a year as there was so little success. Corporate research centers are expensive. They need to earn their keep.
Sell the stock then use the gains to buy the stock? I'm very confused by this.
> without having to first pay tax for the dividend
Long term capital gains and dividends are taxed at the same rate. The only tax-free way to benefit from a higher share price (that I know of) is to borrow against it.
> get their reward in the proportion of their ownership of the company going up.
Which only matters if the company pays dividends, or the shareholders eventually sell.
Now assume I am a long-term investor, who invested money into a company, and wants to keep all that money in the company, instead of taking money out.
If the company pays a dividend, I can put the money they paid me back into the company, but I have to pay capital income tax on the money in between. If they buy back some stock, I have essentially fully reinvested my money to grow my share of ownership in that company, but I have not paid any tax on this, and will only have to do so at the end. As I get to grow compound interest on my money, I will come out much better in the long term.
> As I get to grow compound interest on my money, I will come out much better in the long term.
You will pay the capital gains tax rate either way. Either when you buy 15% less additional shares, or when you sell them at the end and pay the 15% then.
If you start with 15% less and compound it, you still end with 15% less.
(15% is just an example)
You might be placing a bet that at some point in the future there will be a reduction the capital gains rate, but, as far as I can see, you are not earning more due to compounding.
This is incorrect. If the company buys back say $100m worth of its stock, it's true that the individual shares remaining represent a larger fraction of the company, BUT the company itself is worth $100m less after the transaction (because it has spent that $100m on purchase of something that can't be added to the balance sheet - basically incinerated that money from company's point of view, similarly to how paying out dividends is "destroying" money). These two factors cancel out perfectly, and the book value per share remains unchanged.
I'm upvoting because you're advancing the discussion for sure.
Stock grants can actually include dividends.
Even if you don't sell or borrow against it you benefit because you don't have that tax liability, and the money you woulda paid in taxes can continue to be invested.
So it's still better for everyone since only those who need or want the income have to take it.
That only reinforces my viewpoint that buybacks advantage rich shareholders.
> your cap gains rate can vary substantially over time
It is 0% (up to like $100k for a couple filing jointly), 15% (up to about $580k), and 20% above that. Income tax has many more brackets than that and they kick in at way lower incomes.
It's true that your income can vary substantially over time. It might be nice to do earn all your capital gains and dividends in retirement. You will likely need less income then to live on and can incur $100k/year in gains and dividends tax-free. On the other hand, remaining invested in a stock that does buybacks during your working years also concentrates your risk in that stock. So people will likely sell anyway and take some capital gains to diversify.
And finally, if we want companies to improve productivity (read: fewer employees) then we can't solely tax labor to fund everything. We have to tax the part of the pie that's actually growing: this is represented by stock prices and dividends.
Long-term gains and qualified dividends (shares held longer than 60 days) are taxed at the same rate. What's the tax advantage here?
At a societal level, and I understand this is a completely different point, I also question whether it's prudent to allow tax dodging this way. We already tax labor heavily and at the same time we incentivize companies to improve productivity (read: use less labor). How do we pay for society without taxing some of the productivity (read: profits) or taxing labor even more? You can only cut so many services.
Also the reality is that its somewhat rare for retirees to spend down their entire portfolios.
I'm confident I share that psychology with almost everyone.
Well, "don't sell" is the wrong strategy anyway. Trade it in for an index fund.
I already said that buybacks benefit sellers.
> share based M&A or compensation
All fair points. Share-based M&A can be good for investors. But if the stock price is going up because the company spent money on buybacks, then the company could also just pay cash for M&A and skip the buybacks.
Higher compensation is good for employees who get paid stock and for upper management, who are nearly always paid largely in stock. There's an argument that's good for shareholders because of better retention. But if that were the case, why not just pay employees more cash?
Paying cash could be quite different than paying in shares for M&A.
If owning/using shares makes no difference to cash (whether to employees or in M&A situations), why not do buybacks then if there is no difference between cash and shares anyway?
Borrowing against stock is mostly something for HNW people.
> shareeholders benefit from reduced share count because it increases their claim on future profits
So...dividends? Or when they eventually sell? What if I never want to sell?
At least if your broker offers decent margin rates or you sell boxes.
Well, also, your 401k and IRAs are probably superior to this strategy and can't be used as collateral as they're protected in bankruptcy. So it's not worth it until you fill those up.
But it's way riskier.
> At least if your broker offers decent margin rates
I guarantee you no retail broker will give you the rates Elon's broker gives him.
> you sell boxes
I have to guess you mean "box spreads". This is an advanced strategy and again more likely used by HNW people.
A: Hold $10 of stock. Buyback of 1$ per share. You're left with $10 of stock. B: Hold $10 of stock. Dividend of 1$ per share. You're left with 9$ of stock and $1 cash - taxes payed. Once reinvested you have $9 + (1 * tax rate) in stock.
You're making two mistakes: One is thinking that dividends are magic money that do not cause share prices to fall in exact accordance with the distribution and the other is that buybacks lift the share price somehow (they do not, see Modigliani-Miller).
Yes, but less because in many countries dividends are taxed more than selling shares after a share price increase.
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.
Employees are part of a labor market. Supply and demand in the labor market drives compensation levels. When you have a rare skill that is perceived to be valuable, you can get higher compensation - e.g. Meta AI researchers getting $100M contracts or Juan Soto getting a $750M baseball contract.
As mentioned elsewhere, some companies give stock to employees. In my experience this is for one of two reasons. 1) Employee retention - stock grants tend to have multiyear vesting periods designed to keep the employee at the company. 2) Start up companies that do not have the cash to pay employees.
None of these explanations would lead to simply paying employees more with excess cash (unless the cash was created by a group of employees that you were trying to retain).
I agree that it is much more difficult for a CEO to get fired than a line employee as CEOs have significant influence in picking their boarda. However, the consequences to a company of replacing a CEO are generally more significant as well.
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)
It's funny that people tell me they want this because they'll see some of the sales outliers. But then I explain that 1/2 or more of their salary will be dependent on some type of performance metric and most clam up.
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)
Buybacks are just another way of giving profits back to shareholders—an alternative to dividends with different tax implications. Their purpose isn't to "allow companies to reward executives directly", they are just an alternative way for shareholders to share in the profits.
A company could tie executives compensation to the amount of dividend if it wanted. That might be a good idea.
He seemed to have little patience for "scientists" — preferred engineers that shipped shit.
I think that at best he saw research as expensive, at worst he saw it as elitist.
And there's no way the library and its books were a cost — unless perhaps it was attracting snooty engineers who were reading Foley and van Dam when they should have been fixing bugs. ;-) (That actually might have been me.)
At the same time he was clearly enamored with Avadis, very much the academic — appeared to be grooming him for role of Apple CEO. He must have been very disappointed when Avadis left the fold.
"Why We Have to Make UNIX Invisible."
https://www.usenix.org/blog/vault-steve-jobs-keynotes-1987-u...
"That time I had Steve Jobs keynote at Unix Expo"
> They said a Unix weenie was code for software engineers who hated what we were doing to Unix (the operating system we licensed)—putting a graphical user interface on it to dumb it down for grandmothers. They heckled Steve about his efforts to destroy it. His nightmare would be to speak to a crowd of them.
From https://web.archive.org/web/20180628214613/https://www.cake....
The value proposition NeXT found on UNIX, was the same as Microsoft (after they let go of Xenix, thanks to MS-DOS golden goose deal with IBM), a means to an end, the market of companies and universities that wanted something with UNIX in the box.
"NeXT marketing strategy video (1991)"
https://www.youtube.com/watch?v=KRBIH0CA7ZU
Note that he wasn't at Apple when A/UX and MkLinux efforts took place.
Terry Lambert and OSX's UNIX certification https://www.quora.com/What-goes-into-making-an-OS-to-be-Unix...
Compensation expenses (such as stock options, RSUs, etc) are accounted as expenses, which of course reduces profit.
My response (and the whole thread) is pointing out that buybacks are another way to reward executives who have received shares as compensation. Buybacks are not reported as an expense. They are reported as an investment.
This is all boilerplate, very far from "what does that even mean?" territory.
Different person.
Companies are always allowed to reward their executives and other employees by giving them money, stock options, or other rewards.
> 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!
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?
That, combined with stock buybacks and the general take over of Friedman-economics resulted in a far more focused short term thinking and outsourcing research as much as possible due to uncertain horizon risks.
These days you're better off giving it to a university with strings attached. Sure, they might piss a bunch of it away, but when you account for the dollars on the subject you care about after taxes are leeched out it's still more efficient than building out research within the confines of a for-profit entity that gets taxed at such.
This is why we no longer have corporate research labs and damn near every university is bristling with BigCo funded stuff.
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.
Not absolutely everything was great before DEI, and DEI is not the only problem. I gave a number of other problems that have diminished the efficacy of research orgs.
Corporate labs have now gotten so bad that I can outcompete them as an individual which would have been much more difficult in the past.
Mankind has consistently built upon existing knowledge. "If I have seen further, it is by standing on the shoulders of giants. (Newton)"
IMHO, what we are seeing is the US was generating 50% of the world's GDP at the end of World War II. In that era it could afford to many non-economical things - Marshall Plan, funding research at universities, etc. The US is no longer the dominant economic engine. It actually has to prioritize its spending. Money spent on research is money not spent on food stamps, housing the homeless, defense.
What is never mentioned in these discussions is how much money has been spent on research that did nothing. Advanced nothing. When that is factored in, what is the ROI of university-based research?
At least in a sane world it would be.
Except for DNA, CRISPR, WWW, mRNA, the manhattan project, ARPA, GPS, etc
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 out, their role will not be filled by corporations, because corpos 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.
> Apple was already one of the hottest tech firms in the country. Everyone in the Valley wanted a piece of it. So Jobs proposed a deal: he would allow Xerox to buy a hundred thousand shares of his company for a million dollars—its highly anticipated I.P.O. was just a year away—if PARC would “open its kimono.”
Xerox clearly undervalued the research they were producing, but it wasn't like they just gave it away entirely. Per [2] the valuation of those shares in 2018 would be $1.2 billion had they not sold them - undervalued in hindsight, but not nothing.
Xerox's lack of capitalisation was a problem of their own making, not something inherent about investing in basic research.
[1]: https://www.newyorker.com/magazine/2011/05/16/creation-myth
[2]: https://researchnarrative.com/thinkerry/the-company-that-cou...
Parc just didn't capitalize on what they had. I know the Alto was expensive, but still seems like a huge shame.
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.
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.
The same thing will happen to Google & co.
And DuPont is very much alive doing DuPont things.
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.
It's really hard to describe why it's inevitable (there are a lot of factors).
But it's self-evident really. All of the major tech players started with a single innovation that afforded them enough revenue to acquire almost everything else in their portfolio.
Aside from search, the only major product Alphabet built-in house that meaningfully moves the needle revenue-wise is their cloud segment. Youtube was acquired - and it's effectively an extension of search.
Meta had to acquire Instagram and WhatsApp. Without those acquisitions, I have strong doubts they'd still be a major player today.
You can run through this exercise with Microsoft, Apple, Amazon, NVDA etc.
The common theme is they did 1 or 2 things really well, and got big enough to acquire/copy/bully smaller players out of the market.
What's crazy is most of them still rely on that one original thing they did well for >50% of revenue.
I think there's a lot of small factors, but of those the biggest on (IMO) is the fallacy that throwing people at a problem gets it done faster. For some situations: yes, for all situations: no. And you need experience or some kind of sharp intuition to know when to expand and when not to expand.
Add more and more people to a job and they'll find ways to justify their value at the expense of efficiency. And there's a snowball effect from there as an org adds people who believe adding people is always good.
Then the corpo runs into layoffs and everyone throws their hands up and says "How could we have avoided this?" By not overhiring in the first place.
(All IMO naturally.)
Würth is also similar. They make seemingly everything in a segment (lubrication, fuel additives, cleaning, restoration, protection, etc. etc.).
If it feels like there’s nothing for us engineers to research, that’s probably a sign we need more basic research from the scientists!
LLMs are just better google. In the past, you used to google shit, and copy paste from stack overflow, now you just skip the middle man and go directly to Chat GPT. Anyone that has been programming for a while can attest to that the answers aren't any better, its just more efficient to iterate on them now.
AI hasn't even begun to be solved yet. Everyone is focused on feedforward transformer architecture that is never going to replace the imperative processing of actual intelligence.
Smartphones are pretty much solved, as they have replaced a lot of the need for in person interaction (which by extension means transportation). The last decade has been all about monetizing smartphones.
Wearables aren't transforming society at all.
3d printing and home fab is still too niche and expensive for most people, and you can't really make it cheaper and more accessible.
Electric vehicles largely suck. Self driving is mediocre.
We literally went through a pandemic and people got richer because they had to stay at home and not spend money on things like daycare or gas or car maintenance, without losing any productivity.
Hell, the state the US is in currently is largely explained by the fact that most all the problems in society have been solved to the extent that people have to invent bogeymen and elect a demented felon into office on the promise of solving those problems.
What do humans need right now to improve their lives substantially?
Now maybe we could start looking at what research labs have come up with since then.
> Hell, the state the US is in currently is largely explained by the fact that most all the problems in society have been solved to the extent that people have to invent bogeymen and elect a demented felon into office on the promise of solving those problems.
That's... an interesting point. I don't really buy it, though. The same could have been said of the fascist movement in Italy, or the royalists in France in 1905.
yeah, mostly forget about computers, we're still just coming to grips with the fact that we stopped doing largely innovative work decades ago. my bet is its going to go back to being interesting pretty soon. we are having a lot of interesting discussion about cognition though :)
1. Re-invest profits in R&D. Benefit to shareholder: potentially grow the value of their shares dramatically.
2. Make a dividend. Benefit to shareholder: cash that they can re-invest or use, LESS capital gains tax.
Ending stock buybacks creates another option:
3. Buyback stock. Benefit to shareholder: increased share value, and they can control when it is realized.
If there are boards that believe (3) > (1) > (2), then allowing stock buybacks will result in those companies shifting R&D investment into buybacks.
Further more, while some might argue that corporate R&D is better due to being closer to the problem but it is private research and not shared with the world like university research is.
A lot of shareholders also DRIP, but they should prefer buybacks for tax reasons.
He didn't say it was exactly same, only that in principle it's the same - company returning money to shareholders.
Such an action has no effect on company valuation.
Companies were asset rich (which is the seam of valuable companies that private equity has been strip mining for 40 years, but even those are running out now).
Share buybacks are more symbolic that the Reagan era made it easy to take cash out of companies, which led to a race to the bottom of extracting as much cash as possible while leaving little for operations, wages, or expansion.
My impression is that as they calcify into money-printing machines, this stopped. An example being Google's famed 20% that are apparently a long dead memory.
So yes, Amazon represents 'good management thinking' post 2010. But not corporate thinking pre 1980s that, you know, build the US/UK to the positions they were able to cost on up until now.
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.
Oligarch is a specific thing with a specific meaning.
That alone places a combined 3 people with more money than the GDP of all but 20 countries.
Also, "net worth" is not "money". Shares of a company aren't money.
Share buybacks are just the new go-to thing to blame. Economics students (at least "development economics") are memorising this concept all over the globe, so you can expect it more and more.
And it makes sense on this front.
You make tax optimising by dumping profits on R&D less attractive (and around the same time change patenting law with bayh-dole) and make it more attractive to spend it on stock buybacks to directly benefit shareholders
Results seen in the real world line up as less is spent on the former and more on the later so i'm not sure how the blame is unfounded
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.
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).
I don't see why they need to own the original research.
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.
seems to me investing in your own company:
before: use funds actively for research and development
after: use funds passively to "invest" in your company by buying stock
seems like that old parable where someone buries their investment.
EDIT: parable of the talents
I think the core problem is that innovators typically only capture low single digit percent of the value they generate for society.
Bell Labs existed in an anomalous environment where their monopoly allowed them to capture more of the value of R&D, so they invested more into it.
This is the typical argument for public subsidy of R&D across both public and private settings because this low capture rate means that it is underprovisioned for society's benefit.
Basically, if you you think you can leverage your R&D into maintaining your monopoly and extending it to other areas it makes sense if for nothing else to keep the smart people who might otherwise disrupt your monopoly connected to you.
But if you are going to get broken up, just take as much short term profits as soon as you can
Stock buybacks are simply a more tax efficient dividend.
a) allowing share buy-backs might be good or bad. But it isn't good or bad unconditionally! The restrictions on the buyback policy should matter. Ideally, buybacks should make prices boring not create ultra thin books with hefty valuations that are cheaper to manipulate. But it seems the regulations around buybacks are in line with incentivizing growth and not stabilizing real prices.
b) to some extent putting uncertain/opaque research inside corporations is a defense against getting into regimes where it becomes easier to manipulate prices. I hadn't thought of it before, but if if important public companies become beholden to traded price and it becomes easy enough for large foreign entities to move markets, then it is simply a matter of "pricing" short term market punishment of a company for any policy you don't like. Yes, this might seem a bit far fetched, but remember that this kind of incremental worsening of outcomes is precisely what people say is hapenning via regulation and legal challenge in key industries.
Just some interesting thought legs spun off from the discussions here.
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
The driver behind the buybacks was also the motive to shift from research and manufacturing and into profits.
The massive failure is in inaccurately quantifying the true value of these labs.
Only in very rare cases is doing basic science anything but a total waste of money, viewed from a commercial perspective. Companies should seek to be commercial entities, which operate for profit. Anything else is just self destruction.
Look at Bell Labs, it could only exist because some company decided it could use a money shredder. Bell Labs could not survive the dismantling of the Bell telephone monopoly, because ending that monopoly ended the prerequisite that was needed to allow it to exist.
And management doesn't manipulate the stock using stock buybacks. Why would they? Their performance and compensation are only completely tied to stock price. But no, stock buybacks don't allow perverse incentives that lead to short term thinking different than dividends. Totally the same.
Do you genuinely believe that the breakup of the Bell monopoly had a smaller effect on Bell Labs than stock buybacks?
Stock buybacks also are not stock manipulation and managers aren't rewarded because they buy back stocks. The board understand what a stock buyback is, they reward managers for being able to buy back stocks, in other words, they reward them for profits, which are then paid in buybacks or dividends. Stock buy backs are a tool corporations use to reward shareholders, they have no fundamental difference to dividends.
Dividends have the exact same short term incentives. Do you think that a manager can not be rewarded for his paying out dividends, which leads him to cut R&D spending to increase short term profits? It is just delusional to think that there is a difference and certainly in the scientific literature about corporate finance it would be a fringe belief to separate those two as you do.
To be honest it is a bit upsetting to read a comment with so little understanding of the subject and so little imagination. Do you truly believe that managers can not have short term dividend goals? How uninformed are you.
Suddenly they had a more lucrative was to spend their money, so they did.
Convert X% of a stocks value into a dividend and you pay taxes on that before you can buy more stock, but someone who keeps buying stock sees an exponential return. (Higher percentage of the company = larger dividends)
A company buys back X% of its stock functions like a dividend w/ stock purchase, but without that tax on dividends you’re effectively buying more stock. Adding a tax on stock buybacks could eliminate such bias, but it’s unlikely to happen any time soon.
On the other hand, a ton of amazing inventions came out of that system which created entire industries that went on to turbocharge the economy and create millions of jobs. I can see how someone may feel that a company being able to inflate it's stock price more is less useful to humanity and not worth the trade.
There may have been other reasons as well for the collapse of corporate research like changing tax rates, or maybe we were just in a golden age (1940s-1980s) as new advancements in physics and materials science allowed for a rapid amount of discoveries and now we're back in a slower period.
Now consider the choices a company makes when executives hold the Friedman doctrine as orthodoxy. Put money into basic research that might generate shareholder value in some unknown time, or buy their own stock back and pump up the price?
There are still many competing theories of business ethics, but the Friedman doctrine is what drives corporations today.
I don't understand how he became such a big name.
EDIT: Hum... Do the people downvoting have some answer?
It just saves an extra step and doesn't trigger tax event. It also makes more sense. If you prefer cash you sell it on the market to the company. If you prefer holding shares you don't do anything. You get a choice when it cash out instead of being forced to on regular basis.
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.
Military spending is largely economic dead weight, roughly the equivalent of handouts. And the end result is deterrence in a game of prisoners dilemma. Yet it is sacrosanct, and subject to ever increasing budgets for no gain.
The main way the US, UK, and the Netherlands historically became rich was through maritime trade. Maritime trade was basically only possible due to those countries' military expenditures on having strong navies. I know the media makes a big focus on US special forces and other things, but the US Navy is basically the most important and foundational part of all of the US military power. The US and Allies were always interested in maintaining freedom of navigation and trade at the seas.
Just take a look at how much money was lost due to trade shipping costs due to the Houthis in Yemen. Consider that today it's cheaper than ever to ship things, and even today, it was so terrible. Shipping by land is terrible. The only historically economically feasible way to do maritime trade has been with Navies to provide protection from pirates.
(Another fun fact is defense companies make fewer profits during war, not more. Presumably because they have to make real products instead of designing imaginary ones.)
When you build something to the point where there is a bureaucratic "establishment" in control you can be sure that innovation slows to a crawl. You may still have a few individual scientists doing great work, but you can be sure that some miserable bureaucrat will pat him on the back and stick it in a drawer somewhere never to see the light of day again. The same is true whether that bureaucratic establishment is at a government or in universities, or any other type of bureaucratic organization.
This isn't a value judgement. Engineering is just as important as science, but just as more science is not a replacement for engineering, neither does better engineering free us from the need to keep pursuing science. And at the end of the day, SpaceX might be an impressive engineering company, but we still need the scientists. And it's weird how often the success of SpaceX is brought up as an implicit argument that we can send all the scientists to work on farms or whatever without any ill effects.
It also seems notable that a company like SpaceX is an obvious candidate to bring back the 20th century style corporate funded scientific research organizations to underpin their engineering efforts in a way that would presumably be free of the hated "bureaucracy". But if they've done so, I haven't heard about it.
Oh wait..they did...
Because NASA thought reusable rockets were possible decades ago. The reason they never built them was because certain Congressmen blocked the funding.
SpaceX is notorious in the aeronautical industry for attempting to interfere in the research and funding of other companies. Over a decade ago a competitor had viable plans for a 2 stage rocket... until Musk sued to block the funding.
It's not perfect but if you replace the system you're gonna find the same sorts or errors since it's impossible to accurately guess future value of uncertain engineering projects.
This could start to change if present US hostility towards all things foreign results in a shift in investment and migration.
Yup, it was surprise seeing that once have a good STEM field Ph.D., written a lot of STEM and (early) AI software, and have published some peer-reviewed papers, are then condemned as in a felony conviction from ever having money enough to buy a house or to participate in the real world. A surprise.
But so far have missed the law that actually forbids doing some good math research, writing corresponding software, starting an LLC business as a sole proprietor, self-hosting a related Web site, getting users, running ads, and making (oops, forgive the transgression of mentioning) MONEY. Horrors! Uh, that's actually the same kind of "money" that people selling food, clothing, cars, and houses and providing medical care, private K-college education talk about.
Gee, cut out a lot of middle stuff, i.e., save on management, lawyers, office space, recruiting, HR legal issues, insurance, utilities, software developers, cloud fees, server farm staff, servers (an AMD FX 8350 can send a lot of the Web pages with still image banner ads), ....
Just now evaluating Macrium Reflect. Anyone have any experience? Uh, will it copy a disk partition that has a bootable instance of Windows so that the target disk partition will also be bootable or will it copy only whole hard disks with all the partitions, ....???? Similarly for Acronis and Windows Image. E.g., if make an Image of a bootable partition, will the partition written to boot? Right, just use the TIFO method!
I feel like you're confusing "science" and "engineering". SpaceX is fundamentally an engineering company, not a scientific one. Don't get me wrong, they've done impressive work in engineering innovation, but that's fundamentally different from scientific research. And as the article points out, engineering innovation from the likes of SpaceX is usually reliant on that foundational scientific innovation, which in turn is essentially useless without an engineering partner to realize scientific discoveries.
> It doesn't look like the science establishments of any country are actually successfully feeding their innovation machines, or have done so for decades.
Really? Is it just a coincidence that up until recently the US had some of the most robust scientific funding and was an unbeatable source of engineering innovation? For that matter, are there any real counterexamples where science research is non-existent but engineering excellence abounds?
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.
Such as?
The problem is that in Canada we're willing to invest a little for a long time. But we're not willing to make big bets.
You can raise far more capital in the US than in Canada. So naturally large rewards come to those who are willing to make large bets.
Element AI.
It's not that the bets are not made, the winnings are captured by those that corrupt the existing system before it's even started, so tney go nowhere. This has been the status quo for so long everyone assumes it is what is happening with every new initiative.
50% of VC is biotech, HistoSonics is on the front page of HN, and it was a PhD project turned into a huge company with deep, liquid capital markets. BBC doesn’t really write about that but the venture system that made HistoSonics was super sophisticated, full of very bright people willing to take huge risks, and while the inventor isn’t going to be a billionaire, she is still there inventing stuff, and she’s not going to be poor either.
Nobody is asking economists in the article any questions. How does R&D show up as something measurable? - thats really the meaning of financial we care about in this case, as opposed to economic or humanistic, where it’s pretty obvious that Canada, Russia, and the US, among other smaller countries like Israel and Finland, benefit from R&D more than financially, compared to say the UAE, which has spent relatively much more but yielded far less. A very attractive measure, to me, is the productivity of sectors that are basically indexes on a nation’s geography, like real estate, agriculture and minerals, versus innovations-driven sectors like healthcare, education and technology. In relative terms, given how great the weather is and how much oil there is, California and British Columbia (for EXAMPLE) swing way above their weight, no?
Instead of asking why Canada is doing this or that - Canada is doing quite well - we should be looking at South Korea.
Who are you talking about? It’s childish
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?
And this is just mentioning a sample of admin bloat, never mind the other areas.
Cut spending on admin staff and facilities.
Schools do not need amenities to attract students. They need lower tuition. You could teach students out of a tent and do away with all the flashy health spas and do a better job at the core mission of empowering students.
No new buildings, no land acquisitions, no taking over facilities from the state for millions of dollars.
University leadership does not need to make $300k, $600k salaries. They should make what the median professor makes.
Universities will tell you they need all of this to compete with other universities. So to get the ball started, tax all of this as a negative externality and give it to the universities that do not spend in this way. Or turn it into scholarships.
Speaking of scholarships, stop putting a cap on admissions. Let everyone that wants to come in do so if they meet academic thresholds. Let them stay if they maintain a good GPA.
And make student loan debt dischargable. That might mean not everyone qualifies for a loan, but by making the system an "infinite money glitch", universities have grown into gluttons for tuition. They've taken this "free, unlimited money" to grow to obscene proportions. It's malinvestment propped up by an artificial quirk of economics.
If a university truly needs more classrooms, so be it, but much of the spending is going to perks like gyms, saunas, and sports facilities.
There's no free lunch. Its not a free market when a 17yr old with zero job experience can enter loan agreements of 100k per year.
And you know that's true because in any other scenario, the same 17yr old will get laughed out of any loan office. I'm not even sure a 17yr old would get a 400k bank loan if the kid showing up at the bank as the patent holder of Wegovy, for example.
The free market will gladly smash your nation into the ground and kill everyone if it's profitable enough.
This is not true at my state flagship R1 institution. Tuition and fees make up a little over 10% of the institution's total revenue. General funding provided in our state budget provides a larger percentage of the total revenue to the university and federal research funding provides an even larger percentage than the state.
The essential takeaway here is that our state taxes subsidize the actual cost of providing education to in-state students. In-state students are mandated to be at least 80%-ish of students.
The professors in the STEM fields are required to raise a significant percentage of their salary via research grants ("soft" money), teaching, and service work. The non-STEM professors are more often funded via "hard" money - eg, the institution has committed to pay the salary of history professors.
I googled and apparently a little more than 70% of undergraduate students in the US attend public schools. I don't know much about how funding works at the private universities that have the other 30% of undergraduate students.
I'm very skeptical of this claim.
In fact up until a recent funding method change from the Trump Administration, most grant money was subject to "overhead"--a nebulous nonsensical accounting trick that allowed the university administration to get upwards of 60% of the dollars that are earmarked for grants. If you invent something, the school will take 70% of the revenue from the innovation. Much like VC, some big wins can power the school for years.
Actually, most highly productive research universities use the research as a prestige magnet and marketing tool to help grow endowments and keep up in the US News college rankings.
I would be great if the funding weren't so opaque. We may be able to find accounting info for the public univeristies. I would bet money that, Liberal arts tuition likely goes into administration, endowments, and campus improvements for student life (better food in the dining halls...)
We're better than this here. Don't spread misinformation. First of all overhead is listed as a percentage, such as 55% or 60% or whatever but the university doesn't get that fraction of the total grant. You work up the so called direct costs, ie the line item salaries of the researchers, the reagents, etc. and then the overhead is 60% of that figure. So it would work out to be 38% of the total dollars granted.
It's also not a trick. It's a negotiated amount that is supposed to avoid each grant requesting some amortized fraction of the cost of office space and other necessary but shared expenses.
I and most people agree that's it's possibly too high, but it's ignorant to treat it like a scam.
The fact that it is so high is a scam.
It really depends on the grant. For the larger grants, it may work somewhat like you describe. For the smaller grants, they literally do just take 60% of the money (and complain that it is not enough to administer the grant while providing absolutely no support whatsoever). In theory, it's paying for salary and office space and whatnot, but those are already covered by other budgets.
- Professor & students get a grant application for 100K.
- University charges indirects at a ratio (0.55)
- 155K gets transferred from treasury to the university account.
That extra 55K comes from the money that congress allocated for grants, so if congress allocates 1 billion dollars -> 450 million will actually go to professors for research. (less than half).
I don't know about you but the universities I went to were rarely ever building new labs or buildings. Furthermore, those large projects always have state grant money coming out of another funding pool.
Glossing over some details, but the fact of the matter is that it's opaque.
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
The Georgia university system has a set of goals for the advancement of the state of Georgia. It's difficult to make an argument that graduating seniors performing above average are unworthy of higher education, and that this would be best for the state.
Georgia, like most states, recognizes that not every student will fit in every situation and has options to help most/all of them. Georgia Tech is very different from UGA. Both are very different from the network of community colleges.
I used to tutor CS students at several different universities during my first two years at college. I would bet my arm that none of the ones I taught from KSU wound up with a career in software.
The student perspective at these schools is that they're there for the credential, not for the learning. Even at the risk of false negatives, I would actively filter out resumes listing schools like these. I would much sooner interview a non-degree holder.
I am occasionally on hiring committees and use a rubric for ranking candidates. The rubric usually has 8-10 yes/no questions that might be best summarized as "Does this applicant's resume and cover letter indicate that they have actually written code deep enough to 'map' to our requirements?" Some of the rubric may be a little more specific to the actual job role, but the main idea is to filter out what I have come to think of as "aspirational" software developers.
I think one nice thing about the rubric approach is that candidates don't score "prestige" points or get "penalty" points for their specific educational background. Honestly, it seems like a lot of students from many institutions (some quite well known for rigor) are mostly about the "credential, not for the learning." The rubric seems to effectively filter out the less skilled or interested without eliminating skilled candidates with less "sterling" credentials.
I took a group project game development class and it went beyond doing all the work in the group, I think I did all the work in the class.
Two people I know did graduate then change careers and become successful animators on Archer though.
At GA Tech the quality of students were better, but it mostly seemed to me that it worked by beating everyone to death such that you washed out if you couldn't work nonstop. They still weren't especially good eg not a single other student knew what version control was.
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.
There's a chance that it didn't actually happen that way, though.
edit: I also heard that Louis Pasteur did work for breweries, answering the question "Why do some batches come out nasty while most are fine, given the same inputs?"
There is no Ozempic without federal funds for basic research to identify GLP-1. (Nordisk started their research downstream of the US taxpayer's contributions.)
GPT-4, as its builders would certainly admit, is a descendant of early work in the field. This work involves a significant amount of work funded by DoD.
None of this is to detract from these products. But there is no point in pretending that e.g. rocket research is not generally funded by militaries (governments), on which SpaceX built.
In general, if you a citing something with a brand name and a trademark, you are talking about something that is not basic research. Basic research in the US is overwhelmingly government-funded for the simple reason that companies do not invest on the time horizons required and in general cannot take on the amount of risk entailed.
Outpaced? What does that even mean? The whole point is they have different roles and goals. And you need them all, if you cut basic research all the downstream stuff will suffer.
What you’re describing is at least partly engineering and product design, not pure science
1.The government should periodically review how many funded research projects are successfully completed and lead to tangible outcomes.
2. The government should ensure that research funding is properly utilized for the intended purposes, so that resources are used effectively and efficiently.
3. It is necessary to study how artificial intelligence can be leveraged to reduce the cost and duration of research while accelerating scientific experimentation.
- the current system works for the benefit of US industry, military, and the economy
- the current system has delivered real results over many decades
- nobody has proposed how an alternate solution would work ("use AI" is not an answer)
- much less an alternate that has been tested at all
- even much less an alternate that has shown any results
A sensible approach would be to do trials of other approaches before making changes that will ensure Americans are poorer for decades than they otherwise would be.
As basic research transitions to engineering, things built from the current knowledge base, if suitably updated, should be useful. And work within the training set should go well.
If they had evaluated 1993 the discovery would be called useless and a waste of money.
However, I still believe that a light-touch monitoring system is important. It's not about evaluating the usefulness of the discovery in the short term, but rather ensuring that:
Funds are being used for the stated research goals (fiscal responsibility).
The project is making scientific progress as defined by its own milestones (accountability).
How do you differentiate between pursuing a hypothesis that turns out to be incorrect (an essential part of science if we want to actually learn anything new) and failing to make scientific progress?
Not a researcher, but my perception is that this is already part of the process. Is it not?