Mind to Market

Monday, March 19, 2007

Gates on Basic Research

In his recent lecture to the senate, Bill Gates emphasized the need for the U.S. government to increase spending on basic research. Gates calls for an annual increase of 10% for the next seven years; doubling the amount spent on basic research. He feels that this is crucial in order that the U.S. remain a global technology leader.

Gates points out that industrial R&D has increased dramatically over the past 30 years, now making up for two-thirds of total R&D in the U.S. Microsoft itself invests over $6 billion in R&D annually. To a large extent this has been encouraged by the R&D tax credit, a credit which expires at the end of 2007 but which congress will most likely extend. This is of course a federal subsidy of industrial R&D.

Gates' implication is that the government pay for and manage basic research and industry manage applied research with a subsidy from the government. He states that the U.S.' current technological position as a global heavy weight is the result of investments in basic research make years ago. Although there is no doubt that the federal government spends billions in support of basic research and that industry spends twice as much on applied research, how much is actually transferred between the two? Will the transfer of ideas between academia and industry increase proportionally by doubling federal spending in basic research?

Gates' wish is that the U.S. find and commercially develop new and innovative products. His solution is to improve education, loosen immigration policy and increase R&D spending. All in the effort to produce maybe one Google. Meanwhile, Microsoft CEO Steve Ballmer is calling Google "insane" in its efforts to double their staff in the next year. Maybe, but perhaps Google is simply doing in-house what Gates is proposing the U.S. government do with tax-payer funding. Google or the government, you choose.

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