Talk:Lecture 4
Contents
University Research and Economic Development
State and regional government have given hundreds of millions of dollars in the hopes of becoming becoming the uch as Bio or Nano Technology. How does this kind of policy setting influence the research agenda? Does funneling public money in this way necessarily lead to economic development such as more jobs and tax revenue?
Technology Transfer
John Naegle I had two questions for come to mind during the lecture.
The first is if technology transfer is primarly about people, what does that say for educating foreign students with public money in the United States? It seems to make a pretty strong case for not educating foreign students and may be realted to Outsourcing and its impact on innovation?. On the other hand, it is important to bring external ideas into our schools and our country and to be diverse and one way to do that is by educating foreign students. Certainly technology transfer (training people) is not a one way street. I would be partiuclarly interested in finding out hard numbers on how many foreign students are educated in the US in engineering, sciences and business and what percentage of those stay in the US verses return to their country of orgin to work for another country. Most of the foreign born students that I have known have remained in the United States after completing their education.
The second question is what are other countries spending on long term research in IT? We've seen that the United States' spending on long term IT research has waned and what some of the impacts of that might be. Are other countries investing in research along the lines of the Bell Labs, Xerox Park and other major research institutions? What are the trends in global IT research.
Response from Ed
Regarding the education of foreign nationals, you're right that it's a complex equation. Today, more than half the US graduate students in science and engineering are foreign. Traditionally, many have remained in the US. Those who go home take knowledge with them, but can serve as "cultural bridges" between the US and their home countries. Recent US policies have made it more difficult for students to enter the US, and also have made it more difficult for graduated students to remain in the US. I think it's easy to argue that both of these directions are wrong-headed.
I haven't had the time to Google around for the right international R&D comparisons, but here are a few:
Type of government R&D, by country
Trends in US *academic* research by discipline
Total national R&D (including industry) as a percentage of GDP
Response from Rich Newton
In many ways, this relates to what I said at the beginning of the talk. One can see the world as "us versus them", "foreign verus domestic", etc., or one can step above that view and see the entire world as a collection of people and processes that one must work to optimize to ones personal, regional, or organizational advantage. If you view the world today, and your advantage in it, as primarily defined by the *connections* you establish (the relationships you invest in and their implications)rather than the *boundaries* you define (the "enemies" you prescribe--a kind of "Lexus and the Olive Tree" view), then the challenge is selecting and reinforcing those relationships. In that sense, there is an argument for educating foreign-born students not only if they "stay in the United States," but as reinforcement of those global connections. Annalee Saxenian (Dean of SIMS at Berkeley) talks about "brain circulation" rather than "brain drain" or "reverse brain drain". I certainly subscribe to that view. After all, I'm a foreign student who came here and "stayed" (by the way, my average speed for the entire last year, 24 hours a day, was 35mph and my average altitude was 4,000', so "stayed" is also a relative term in today's world for me!).
There are some numbers about how many people "stay" here and how many do not, but they are not very solid. Most people "stay"--but for how long? How do you capture the fact that many of the senior founders of TSMC and other Taiwanese companies came from US semiconductor companies after 10, 15, 20 years on the job at companies like TI, AMD, National Semiconductor and the like here in the US? Their experience was critical to that success. The same is now happening on the mainland.
Of course their are national and cultural ties that contribute to the "return" of people, but let's not forget the role of governmental policies in this either. After all, the cost of running an advanced semiconductor plant is only 3% about salaries, and is 97% about the cost of capital. China is investing heavily to bring these facilites there not as an end in themselves, but because of the skills, the related industries that are sure to develop, and the large internal market they represent. We could do that too, but we don't!
There should be no doubt that we babafit greatly from the diverse student body we draw from around the world, and we should be *very* concerned if we continue with the kinds of restrictive and burdensome entry policies we have today, let alone any further restriction on foreign people exchange. Many of those smart young people are already going elsewhere (many to universities in Europe, anecdotally), and if we lose them we lose a large component of our potential for future success. Like you (and I) said--in the end, it is all about people!
Finally on this one, if we *are* to compete and take the global, inclusive leadership perspective I believe we should aspire to, *our* students also need experience in the world and so I believe every engineering student should have the chance to spend an extended period of time (3-6mos, perhaps) in an entirely different culture, ideally inspired by some engineering project or idea. This should be a part of our curriculum. Along with it, we also need a more balanced education in our engineering curriculum related to public policy, the law, and culture--we are working on that one!
On Part 2, other countries are spending quite a bit on long term research in basic science and engineering, including IT. As Bill Gates said two weeks ago when he was at Berkeley (and I agree with him), IT is a basis and necessity for the future of pretty much every new development in the sciences and other areas as well--from nano to bio to 17th C french literature and archeology. And there are tough, hairy, interesting IT problems and challenges in every area. Some countries are approaching these investments strategically (e.g. China), and some more tactically (e.g. India). I don't have the numbers handy, but will try to get them. Remember, Bell Labs, Xerox, etc. were private companies--MSR China is a fantastic lab with highly productive researchers. As the president of Cadence said a while back (and as others have said...), while they would certainly *like* to invest more in R&D here, they will invest where the talent is, where the problems are well understaood, and then where the cost-efficiency-effectiveness is maximized.
Response from Mohammed El-Gammal
In the late nineties, the National Science Foundation commissioned a study to look at the issue of “International Mobility of Scientists and Engineers to the United states”. The gist of the study is that unlike the 50’s and 60’s when the mobility of international students was unidirectional from the country of origin to the US, there is an increasing degree of circulation. You can find the report here [1]
I completely agree with what Ed and Rich Newton mentioned above. It is also worth mentioning that there are a number of indirect benefits to United States from international students who study in the US and decide to go back to the country of origin. Most go back for high-level opportunities in their countries, taking back with them ideals that favor market economies and open competition. They also tend to have connections to US businesses and of course academia, which creates favorable environments for US business oversees.
In addition, and this is from personal experiences, parent who studied in the United States tend to send their children back to study in the US instead of other places around the world, which helped make higher education America's 5th largest service export, bringing $12 billion a year on tuition and living expenses to the US economy.
How about US students?
Santeri Voutilainen -- As Ed mentions, more than half of US graduate students in science and engineering are foreign. What, if anything, does this say about the level and focus of science and engineering education in the US at the primary, secondary and even college level? I seem to recall from somewhere that the US has been below average in these areas, although the two references below don't fully agree (in 1995 the US was below average in math but above in science, while in 2000 the US pretty much average), at least within OECD countries. Since it is all about people, is there any concern that the US will not "produce" enough people itself and that even higher percentages will be foreign? Going off topic, what are the "national security" implications?
National Security
I believe that a lot of the artificial barriers placed on foreign students are carried under the banner of such slogans as “National Security”. While a very valid concern for a leading nation to feel weary about the dissemination of its critical knowledge especially when it relates to defense, this should not overshadow other goals as bridging cultures and sharing vital knowledge with the rest of humanity. It indeed takes a sound vision and much courage to use one’s work to further not just the immediate community being one’s “Nation” but also the larger World Community. We also have to remember that many nations’ borders are lines drawn by humans with little consensus and much conflict. It seems utterly senseless to let those artificial boundaries control the sharing of knowledge for the well being of humanity.
- Tolba 00:49, 25 Oct 2004 (PDT)
Networks and Interoperability Standards
Recent FCC Decision
Hi, sorry if this question is kind of long. I started to ask this at the very end of lecture on Thursday (in San Diego) but the speaker didn't hear me. :)
There was a brief discussion at the very end of lecture regarding the economics of the "last mile" that pertains to a debate that's been playing out in the press lately that I've always wondered about. As the speaker pointed out, long-distance phone service is a competitive market, but local phone service is essentially a monopoly (and as of today no clear technology has come to the rescue to alter this situation, VOIP and satellite/wireless technology notwithstanding).
Anyway, the speaker mentioned this briefly, but to recap, I believe that the regional Bells (such as Verizon and SBC-- the LOCAL phone service providers) have for years been required by the government to lease the use of their lines out to competitors at set prices. The argument for that policy, as I understand it, was that since they are monopolies, regulating them in such fashion is necessary to keep consumer phone prices reasonable.
However, many critics of this policy have pointed out that this produces a powerful disincentive for the Bells to invest in their network, since they know that they won't be able to adequately recoup on such investment (they'll be forced to share with competitors), and this is one of the reason broadband/fiber-to-the-home deployment lags in the United States.
There have been a series of recent decisions at the FCC that I believe have now effectively reversed this policy. (Check out the article I copied/pasted from the Wall Street Journal below; hopefully that counts as "fair use" :))
Each side in this debate makes a lot of noise through hired lobbyists so I've found it difficult to cut through the spin. Just wanted to ask the speaker (and anyone else): from an economists' perspective, who has the better end of the argument here? Is the current FCC policy of deregulation a wise one? Is it likely to speed broadband deployment, as deregulation proponents have suggested? Is it likely to raise phone service prices, as critics and AT&T lobbyists have suggested?
Thanks, --Erik
SMM: Thanks for the article. The way I read it, AT&T and the cable companies have been providing more and more phone service. That's ok with them, but they think that it would be immoral for the phone company to supply cable TV. The naive judgment, often right, is that the consumer now has two ways to get signals out of the house, which may not be competition but is at least a duopoly.
The counterargument is that "open access" would have permitted multiple providers to sell their wares using the phone company's lines. Since the access fee for using those lines is set by regulators, the final price that consumers pay is not really a market price at all. Like all regulated prices, it's going to under- or over-reward SBC. One version gets too little innovation, the other gouges consumers.
So my bottom line is that the FCC has made a judgment that the duopoly solution will be nearer to the ideal (market) price than any fake price that the regulators are likely to come up with. This conclusion is buttressed by the fact that both sides are going to be racing to build their network size, so they may be inclined to give consumers a break anyhow. The FCC's attitude over the past ten years or so has frequently been "wait and see" -- They aren't saying they won't regulate in the future, just that it doesn't seem to be necessary now and may never be.
Regional Bells Get Broadband Win
FCC Votes to End Rules On Certain Network Sharing; Rivals, Activists Decry Move
By ANNE MARIE SQUEO Staff Reporter of THE WALL STREET JOURNAL October 15, 2004; Page B8
WASHINGTON -- Regional Bells including Verizon Communications Inc. and SBC Communications Inc. scored a major victory when the Federal Communications Commission voted to end requirements that the companies share certain fiber-optic broadband networks with rivals.
The decision, which would let the Bells build fiber-optic networks to within 500 feet of a customer's home, is likely to help the Bells in their drive to expand offerings into television and video services to better compete with cable-TV companies, which have been taking away phone customers.
SBC yesterday said it would accelerate its plan to build an all-digital, high-speed network that reaches 18 million homes by 2007, two years earlier than planned. "This is the latest in a series of broadband rulings that demonstrate this administration and the FCC understand that keeping outdated regulation off of tomorrow's technology will boost jobs, investment and innovation," said SBC Chairman and Chief Executive Edward Whitacre.
The FCC 's decision is another blow to AT&T Corp. and other companies that entered the local-phone market through a provision in the 1996 Telecommunications Act requiring the Bells share their local-phone networks with rivals.
AT&T Vice President Len Cali said yesterday's order likely will lead to an "inevitable grab by the Bells to expand their [phone] monopoly."
Consumer activists and rivals decried the FCC 's move, saying it will lead to higher prices for consumers.
As telephone and cable industries "tighten their hold on high-speed Internet access, consumers will see their choices diminish and their bills skyrocket," said Gene Kimmelman, senior policy director for Consumers Union, an advocacy group.
Coming just months after a federal appeals-court ruling that is expected to lead to higher leasing rates for local-phone service, the reduced access to high-speed Internet lines will limit the options for many service providers. Companies such as Vonage Holdings Corp. often use Bell rivals to connect calls cheaply from their Internet phone customers to those callers using the traditional phone system.
While yesterday's decision applies only to the residential market, the FCC said it was considering an extension to business customers as well, an area where Bell rivals have been able to gain significant ground during the past three years.
The issue gets to the heart of FCC Chairman Michael Powell's vision for what constitutes competition in a converging marketplace, where telecom companies will provide movies and television service to the home and electricity providers also will offer broadband. In this environment, at least four major industries -- telecom, cable, wireless and electricity -- would compete head-on.
To that end, the FCC also adopted measures intended to encourage electricity providers to use the nation's power grid to provide communications services. This technology is still in its infancy, with trials being done around the country.
Write to Anne Marie Squeo at annemarie.squeo@wsj.com
The anti-network effect?
Remegraw: 00:22, 22 Oct 2004 (PDT) With the network effect we saw that consumers shift their demand curves out as the total number of comsumers in the network increases. this made me wonder, are there cases in which the opposite is true (i.e. consumers shift their demand curves in as the size of the network increases)? A couple of markets that come to mind are collectibles. The more friends of mins that have beanie babies, the less I want one for myself. The same may be true for certain tech products in so much that they are also status symbols as long as there is some exclusivity to them (e.g. latest wireless gadget, etc). Might the same be true of weapons technology? I might be most interested in having the weapon that nobody else has. When everyone has nuclear weapons, I might value having them less. The commonality here seems to be that the spread of a good through the network neutralizes some of the value for any individual consumer.
Jesse Ruderman: A possible anti-network effect comes from software security holes. The argument goes like this: "Security researchers concentrate on looking for holes in popular browsers, and malware authors will concentrate on exploiting holes in popular browsers, so you're safer if you use a less popular browser." This argument assumes that all browsers are equally insecure and that your enemies do not employ security researchers.
A large part of Firefox's popular comes from the perception that it is more secure than Internet Explorer. Some have argued that any security benefit to switching to Firefox will disappear as soon as Firefox becomes popular. mozilla.org has been trying to convince people that Firefox appears more secure not because of its small market share (temporary), but because it is better-designed. I think it's interesting that the project is attempting to discount an anti-network effect that will be in its favor for the foreseeable future.
Patrick Haluptzok: Certainly for some people that want to be different the anti-network effect will change their habits for collectibles and fashion. Basic economics for supply/demand provides a slight anti-network effect on many things because the more people who want/buy it the more expensive it becomes if it's supply is limited. Some items get an economy of scale in production - but eventually if the demand grows beyond the easy supply of raw materials then its cost goes up and drives people out. I think we see that now with gas/oil being overused, and actually even in roads being too congested and folks leaving the system when possible due to cost or contention for the resource
Viral marketing
--Remegraw 00:36, 22 Oct 2004 (PDT) When the network effect is present, it seems that consumers of a given product have an incentive to bring others to their network to increase the value of the product they've already purchased. In certain situations, suppliers can exploit this to lower their marketing costs by having the consumer do the marketing for them. Perhaps the "friends and family" and "free in network calling" type calling plans are efforts by phone service providers create this type of incentive where it wouldn't exist naturally.
SMM: Absolutely. I'm not sure though about it "wouldn't exist naturally." In reality, you don't really care about being connected to everyone in the entire society. It's enough to be connected to family. So if the company can offer you that, maybe it doesn't have to have the biggest number of total subscribers to win you over.
Also, note that the cell phone industry loves to lock in consumers. Once you and your family have had the family council and decided to go with Verizon, what are the chances that you'll get everyone to switch a second time when Nextel comes along with a better price?
--Remegraw 18:38, 25 Oct 2004 (PDT) By not existing naturally, I meant the network effect for a particular service provider would not exist without the "friends and family" marketing concept. For example, I need not have Verizon service to call someone who has Verizon service. So in this sense, there is not a network effect associated with joining a particular service provider. But by creating the "friends and family" program, comsumers have an incentive to use the service provider most used by the people they wish to call, and a network effect for the service provider does indeed appear.
The research network effect
--Remegraw 00:46, 22 Oct 2004 (PDT) There's an interesting relationship between the two parts the lecture today. When companies donate software, hardware, training, etc. to universities, it isn't just about the research. It's about seeding the network effect. It's a competitive strategy to invest in building a network of consumers of their technologies. Should universities and other public institutions take part in this?
SMM: I think the answer has all the ambiguities of networks themselves. In general, the network externality is a genuinely good thing -- people value it. So why shouldn't the university go along with it? On the other hand, people sometimes complain that certain standards will lead to companies becoming monopolies.
--Ted Zuvich I have a question along these lines. Paraphrasing what was said in the lecture: universities should not worry about squeezing every last drop of money out of licensing and IP. They're better off relying on the gratitude and generosity of the companies that they help. Is this a correct statement?
Response from Ed
Indeed, the federal restrictions imposed upon IBM in the late 1960s included restrictions on their programs involving donations of mainframes to universities!
Speaking only slightly facetiously, (a) we are willing to help *any* company build its network, and (b) if we had to rely on our state budget for the hardware and software used to educate our students, we would still be using punch cards.
SMM: I'd say it's not so much about gratitude and generosity as enlightened self-interest. Companies know that certain lines of research will eventually cut costs and entice consumers -- The same reason that PG&E bought CalTech a high tension lab in 1918 or the aircraft companies built windtunnels at CalTech in the 1930s. Except in biology, companies can usually get by without exclusive rights as long as they can freely use the information.
Conversely, gratitude is easier since there's not all that much money to squeeze out in the first place. Remember, typical licensing offices make almost all of their money from 2 or 3 patents. In practice, the big winners are overwhelmingly biology patents.
Constitutional Obligation of Copyrights?
We have been talking about alternatives to patents and copyrights, and perhaps we have already touched on this, but Article I, Section 8, Clause 8 of the Constitution reads: "to promote the Progress of Science and useful Arts, by securing for limited times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries." Does this mean that not issuing copyrights is unconstitutional?
Jeff West It seems to me that you are correct; without a change in the constitution it doesn't appear that copyrights (in some form) could become competely obsolete. However, it seems that before your quote is the text "congress shall have the power," therefore, it seems that congress has the ability to either choose for itself or establish some entity to choose when a copyright (or its equivalent protection) would be granted. While I don't think that it would be very easy for all "securing for limited times... exclusive Right" to cease, it could become far more difficult.
U.S. Science Students Disappearing
(User: John) What is the point of spending lots of energy and money to graduate in the sciences, when all the science jobs are being outsourced to other countries? Most large employers of engineers, lab scientists, and health related scientists are outsourcing to China, India, Russia, Latin America, Indonesia, and even Korea. Students aren't dumb. They want jobs with futures. Perhaps, it is time to address these concerns in the political forum. Our ability to defend ourselves in the next big war will be dependent upon our innate scientific knowledge and skilled citizens.
