The rising returns to R&D: Ideas are not getting harder to find

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5242171

by surprisetalk • 11 months ago

142 97 11 months ago

papers.ssrn.com

moomin• 11 months ago

Checking I understand this right: the paper’s contention is that more R&D, whilst still producing productivity gains, is invalidating gains made from other R@D? e.g. everyone developing their own LLM. It’s an interesting idea, but why would that be happening?

DrScientist4• 11 months ago

I think the problem might be how you measure productivity.

If you measure effort and output - then surely productivity has gone up - but if they measure it in another way - say capital to return - it might not have?

mensetmanusman6• 11 months ago

If the OECD is to be believed, the elephant in the room is that China negated the value of western R&D by about $500B per year since 2010.

That’s why being a fast follower is so valuable, you get everyone else to waste money on the wrong ways to build things. It also causes R&D to show much worse returns.

exasperaited• 11 months ago

That’s why being a fast follower is so valuable, you get everyone else to waste money on the wrong ways to build things. It also causes R&D to show much worse returns.

Frankly I think this is the big cultural change in tech generally, isn't it? People come up with ideas and everyone goes "oh I want to do that", so they replicate it off the back of the work everyone else has done. Uncritical FOMO.

But actually it's better to be an even slower follower, generally, as a survivor strategy. Apple and Nintendo shows this. It's better to go "I see what they are all doing, and I see where they think consumers are, but I think they are wrong, and I think it's not just a question of them going about it wrong, but that all of this evidence suggests consumers actually wish they were getting this other thing, and that is what we should build".

moron4hire• 11 months ago

Apple and Nintendo have some of the strongest brand loyalty this side of macrobrewed beer and sports teams. They can afford to go against the current because they have extremely deep barrels of fanatics who will buy just about anything they make, regardless of whether it's cutting edge or not.

shakow2• 11 months ago

This works for Apple & Nintendo because they built their brand image while being fast-followers – and even pioneers decades ago (the Apple ][ was among the trailblazers, just like the GameBoy or the (S)NES).

I would bet that a company trying to replicate that strategy without the previously established brand image would not go very far.

StopDisinfo9102• 11 months ago

Your exemples are not very good.

Nintendo has always been an innovative company. They have gone against the rest of the industry time and time again. What they don’t do is follow. They don’t go for ever increasing performance. They don’t chase ports. The Wii with motion control, the switch merging handheld and tv based, both were very new idea.

moomoo1110• 11 months ago

I think the solution is to knock them down to a point that they are like India or Russia.

Just big countries but stuck.

I wouldn’t mind if we could make some plays to revamp Japan and some EU, and maybe grow India while boxing China and Russia together.

As long as those countries have governments that aren’t on our side or at least sympathetic to our vision, they should be kept in check hard. Like manufacturing stuff for us but not really being able to use any of it. Sounds harsh but that’s reality. Nothing personal lol

All they’ve done is steal anyway and extracting knowledge from us after we showed them how to make a factory (reductionist but idc), so it’s not like we would be “morally” wrong.

ubercore• 11 months ago

How do you expect them to manufacture stuff but not learn from it in the process?

zonghao3• 11 months ago

I often browse Hacker News and like it here. As a young Chinese entrepreneur, comments like these make me feel frustrated. China has a large wealth gap, and we have many people with lower education levels who earn meager wages through manual labor to support their families, highly dependent on manufacturing for income. In a sense, they are somewhat like the American Rust Belt before the loss of manufacturing (though they probably don't live as well as Americans, as they can afford neither homes nor cars). The setbacks manufacturing faces in international trade are making their lives even worse. I can roughly understand why you made such a comment, because many friendly and kind people around you are, or have been, worse off due to the competition between our countries. The people around me are also friendly and kind, and I think the best outcome should be for all of us to live better, rather than one side getting better at the expense of the other. I think we should find ways to develop that benefit everyone, because we are all human, and those who are awake when you are sleeping are not bad people.

nemomarx• 11 months ago

I can't think of any way you could effect this. They have more industrial capacity and increasingly more research than the US.

Heck I don't think India is going to be stuck for very long

appease7727• 11 months ago

So you think the USA should interfere in a sovereign nation to intentionally and drastically damage their economy, industry, and quality of life?

Because the US can't get their collective heads out of their asses to build a competitive industry?

The USA is losing this imagined fight with China, and the solution is not to destroy an entire nation, but to actually become competitive.

Sure, let's just fucking nuke every country that's more successful than us. That'll show them!

Americans are absolutely fucking insane.

woopwoop• 11 months ago

I do not, and have never, understood why absolute R&D investment is compared to relative growth rate in this literature. It would make sense to compare R&D spending as a percentage of GDP to relative growth, or to compare absolute R&D spending to absolute per-year growth, but I remain mystified by the comparison of absolute R&D spending with relative growth.

ethan_smith• 11 months ago

The comparison makes sense in endogenous growth theory where knowledge production has a Cobb-Douglas form - doubling researchers should double the absolute ideas produced, which translates to a constant growth rate under standard assumptions about how ideas affect production.

johnnyanmac5• 11 months ago

Is this another moore's law where we try to suggest that trends will not hit some ceiling and start to taper off in growth?

imtringued• 11 months ago

That sounds absolutely nonsensical.

So you're telling me if I have 10 researchers and an economy of 1 billion people, the growth rate should be constant? If I have 20 researchers the growth rate should double? Remember, growth is measured as a percentage increase, not a linear increase

Even if the concepts of what you're talking about make sense when they are being properly elaborated, the way you have elaborated them is extremely poor.

CyanLite2• 11 months ago

Their dataset only runs up to 2018?

jjk1662• 11 months ago

They show R&D is effective and R&D spending is up, and conclude obsolescence must be the reason this is not reflected in productivity pretty much by process of elimination. However there is an alternative - that for reasons unrelated to R&D, productivity is actually being driven down, and ever increasing R&D output is necessary just to maintain current levels of productivity.

In particular, they are looking at US manufacturing. While this is a diverse industry, it's clear that in many subfields there is quite a bit of saturation. When everyone has a car, and cars last longer and longer, the need for new cars goes down. Once you get to a point where your industrial capacity can provide enough to satisfy demand, further R&D only reduces the costs of satisfying that demand, not increased output, and in some cases improvements to product quality may even further reduce demand. In the US, light vehicle sales peaked in 2000, and while the numbers dipped during various market downturns, they keep coming back to roughly the same asymptote. The numbers are even more striking if you break it down further - the annual demand for personal vehicles has fallen by a factor of 4 since 1965, and by a factor of 3 since 2000, the difference being made up by increased commercial vehicle demand. Looking at other industries like steel paints a similar picture.

typewithrhythm• 11 months ago

This would only decrease productivity if there was no other demands for people to do something; if this was a simultaneous saturation across everything that a company could do with their current resources.

DrScientist4• 11 months ago

What happens if the prices of cars are depressed by the increasing efficiency, competition and product longevity, and the people displaced through efficiency are taking lower paid jobs.

If you measure output as GDP - wouldn't GDP have gone down - even if actual production of goods and services has gone up?

Not sure how they measure productivity here.

jjk1662• 11 months ago

if this was a simultaneous saturation across everything that a company could do with their current resources.

That's exactly what I am describing. It's not that a particular style of vehicle is no longer in demand due to a shift in preferences and factories would need to be retooled to create a different type of vehicle, demand for all vehicles has fallen. Yes, the people who once worked on those auto assembly lines will generally go on to do something else, but it won't count as an increase in productivity in car production.

More generally, demand for pretty much all US domestic manufactured goods has flatlined or fallen. Production capacity is not the limiting factor in almost anything mass produced nowadays. Even dramatic reductions in manufacturing cost aren't going to induce any demand. Throw in demographic changes where there are fewer people who have needs to be satisfied, and better products which don't need to be replaced as often, and we ought to expect falling demand across the board.

user3939382• 11 months ago

If anyone needs ideas I have about 10 per day

hn_acc1• 11 months ago

Got anywhere you're willing to write them down? I'm like your reverse twin - I never have ideas I think are commercially viable. But I think I'm a decent coder (30+ years of gainful employment in the Linux space).

jaggederest• 11 months ago

There used to be the halfbakery. I guess there still is. https://www.halfbakery.com/

JSR_FDED• 11 months ago

They are specifically looking at R&D in Manufacturing. I think there you can make the case (as they do) that one new innovation can erase the productivity benefits of a prior innovation.

zw123456• 11 months ago

I am writing a book about this topic. I started my career in 1978 at Bell Labs and worked in 3 different startups after that. After 45 years in R&D, I have recently retired. So many times, the inspiration for new inventions we worked on came from unexpected sources; the arts, culture, music, history and many other sources. And I said we on purpose because rarely did a new invention come from one person, it was almost always from collaboration on a team. My conclusion is that invention so often comes from a team of well rounded people with knowledge in many areas and the ability to work in a team. I wonder if the decline in the productivity in R&D comes from a decline in these attributes?

wrp2• 11 months ago

In research on creativity in the arts and sciences, the importance of a supportive community is seen to be so important that some researchers deny the validity of the idea of the creative genius working in isolation.

Interested in your project. Can you point to any similar books and how you are expanding on them?

9rx3• 11 months ago

some researchers deny the validity of the idea of the creative genius working in isolation.

Is it that they deny the entire possibility of a creative genius working in isolation, or deny that a creative genius working in isolation, without a supporting community to spread the good word, will still see his work make it out into the world?

mnky9800n• 11 months ago

I would love to discuss with you on zoom about your career and your book.

tgbugs• 11 months ago

This would seem to be a direct corollary to the red queen hypothesis applied in the context corporations instead of species. That is, in a competitive environment you have to keep spending R&D dollars to stay in the same relative market position because everyone else around is spending as well. However the paper talks about productivity of the individual firm and aggregate productivity (presumably across the whole economy). Therefore I think that the red queen may not be whole story, because firms should still be getting more efficient (more productive) even if they can't capture that value due to competition, the production possibilities frontier should be growing because we need less capital to accomplish the same tasks, leaving more for other things. However it seems that this is not the case? So what the paper seems to mean by "increased rates of obsolescence" is that there is so much churn within organizations that they can't actually get something implemented in a way that actually allows them to capitalize on the potential increased productivity? That sounds like a complexity wall, but I feel like I'm feel like I'm missing something.

9rx3• 11 months ago

there is so much churn within organizations that they can't actually get something implemented in a way that actually allows them to capitalize on the potential increased productivity?

The churn is in market attention. While you are setting to capitalize on potential increases in productivity, the competition has already come out with something better and the customer has moved on.

fuzzfactor2• 11 months ago

R & D is about the only thing you have if you want to make something out of nothing.

Most other forms of value-added activity need to start with something of value to begin with.

The closer that that "nothing" can be brought to zero, the greater the leverage by comparison until it wipes the floor with everything else.

It wasn't so bad until all the MBA's came along, they have nothing like the equations that are needed to figure this out when the data is not numbers yet. Regular non-degreed business operators used to be so much more advanced in mathematical intuition regardless.

The researchers stayed as talented, plus got better technology, the founding giants of leadership lasted as long as they could but were replaced by midgets, and here we are.

amelius• 11 months ago

Ideas are not getting harder to find

Evading patent minefields, however ...

Especially now that AI can continuously scan for infringement, ideas are getting harder to use.

nikanj• 11 months ago

You can recycle any old idea into a brand-new-and-patentable idea by adding "with AI" to the end. For example, "assessing value for used cars" is an old idea, but "assessing value for used cars WITH AI" is a new idea

IronyMan100• 11 months ago

"These findings suggest that R&D has become more effective at finding productivity-enhancing ideas, but these ideas may also render rivals’ technologies obsolete, making innovations more transient. Because of obsolescence, rising R&D does not necessarily mean rising aggregate productivity growth."

I Don't Unserstand that. Innovative should increase productivity. If i deploy a new technology i should see productivity gains. Does that Not mean we see should se productivity gains regardless of how fast a technology becomes obsolete? Maybe technologies do not get adopted that fast or the productivity gains do not justify the Investment?

The rising returns to R&D: Ideas are not getting harder to find

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