"If you haven’t sold anything, you haven’t innovated" – The Idea Factory: Bell Labs

This article was originally posted in Medium.

"The Idea Factory: Bell Labs and the Great Age of American Innovation" is one of the greatest books I’ve ever read about innovation. I’ve loved every part of it. It’s long, sometimes it goes deep into technical explanations but Jon Gertner has done a really good job sharing the first steps, the world-changing innovations developed at Bell Labs and the end of it.

He writes about research, product and process innovation. All of them were key to the success of Bell Labs. Which are those innovations? Radio astronomy, the transistor, the laser, the charge-coupled device (CCD), information theory, the operating systems Unix, Plan 9, the programming languages C, C++, the origin of Sig Sigma, the first TV transmission, the photovoltaic cell and the first modern solar cell, the first digital scrambled speech transmission system (used by the Allies in World War II), Hamming codes, modern cryptography, the first transatlantic telephone cable, the first semiconductors, communications satellites, Cosmic Microwave Background, first computer-animated movies, the video call (in 1971!), Optical fiber systems, the single-chip 32-bit microprocessor, TDMA and CDMA digital cellular telephone technology, the 56K modem and many many other technical innovation.

Basically all our current technologies are based on the progress done by Bell Labs. We owe our current progress to them. This is a must read book to any engineer and innovation person. If you are a Telecommunication Engineer, stop reading and go buy the book now! In fact, it’s so great this should be the first thing new engineers should do on their first days at college.

I’ve had a hard time selecting the quotes to share because there are so many. I hope they provide a glimpse of the book.

“Of its output inventions are a valuable part, but invention is not to be scheduled nor coerced.” The point of this kind of experimentation was to provide a free environment for “the operation of genius.” His point was that genius would undoubtedly improve the company’s operations just as ordinary engineering could. But genius was not predictable. You had to give it room to assert itself.

IN TECHNOLOGY, the odds of making something truly new and popular have always tilted toward failure. That was why Kelly let many members of his research department roam free, sometimes without concrete goals, for years on end. He knew they would fail far more often than not.

The managers at Bell Labs not only hired the best of the best but they also provide them with the space to innovate freely. They allow them to research without deadlines or without a clear purpose. They also mixed the teams making physicists and engineers work together. This combination produced more interactions between teams and it accelerated the innovation pace.

“It appears that Transistors might have important uses in electronic computer circuits,” Jay Forrester, the associate director of MIT’s electrical engineering department, wrote to Bown in July 1948. “In view of this fact, we would like to obtain some sample transistors when they become available in order to investigate their possible applications to high-speed digital computing apparatus.”

The invention of the transistor was a bombshell for the scientific and engineer community. Every company and university asked Bell Labs for samples of it to see what they could do with them. Why Bell Labs was given samples? Because ATT was already being investigated for being a monopoly so they decided to open their innovations to the public.

As Jack Morton had said, if you hadn’t sold anything you hadn’t innovated, and without an affordable price you could never sell anything.

One of my professors at college was always telling us this quote despite it’s a fact rejected by many on the scientific and engineer community. Can you innovate without adding value to someone?

Shannon summarized his war work on secret communications in a 114-page opus, “A Mathematical Theory of Cryptography,” which he finished in 1945. The paper was immediately deemed classified and too sensitive for publication. He had offered a persuasive analysis of which methods might be unbreakable (what he called “ideal”) and which cryptographic systems might be most practical if an unbreakable system were deemed too complex or unwieldy.

SHANNON’S PAPER contained a claim so surprising that it seemed impossible to many at the time, and yet it would soon be proven true. He showed that any digital message could be sent with virtual perfection, even along the noisiest wire, as long as you included error-correcting codes — essentially extra bits of information, formulated as additional 1s and 0s — with the original message.

Even fifty years later, this idea would leave many engineers slack-jawed. “To make the chance of error as small as you wish?” Robert Fano, a friend and colleague of Shannon’s, later pointed out. “How he got that insight, how he even came to believe such a thing, I don’t know.” All modern communications engineering, from cell phone transmissions to compact discs and deep space communications, is based upon this insight.

With Shannon’s startling ideas on information, it was one of the rare moments in history, an academic would later point out, “where somebody founded a field, stated all the major results, and proved most of them all pretty much at once.”. Eventually, mathematicians would debate not whether Shannon was ahead of his contemporaries. They would debate whether he was twenty, or thirty, or fifty years ahead.

I remember thinking the same when I was studying Shannon Theory in college. It has definitively been one of the brightest discoveries in history.

Bello highlighted the combined power of the transistor and Shannon’s information theory to create the future. It’s likely that at the time of their breakthroughs, Shannon and Shockley did not see their work as being linked. But within a decade their ideas had become intertwined. As Bello wrote, “The transistor pointed the way to tiny, inexpensive, and indefinitely lived devices — requiring little power — that could be used in very large numbers to implement the teachings of Shannon’s theory.”

They worked on the same building, they knew each other but at the time they didn’t realize the combined impact of their two innovations.

A staffer with a question would casually seek out an expert, “whether he be a mathematician, a metallurgist, an organic chemist, an electromagnetic propagation physicist, or an electron device specialist.” At the Labs this was sometimes known as going to “the guy who wrote the book.” And it was often literally true. The guy who wrote the definitive book on a subject — Shockley on semiconductors, John Tukey on statistics, Claude Shannon on information, and so forth — was often just down the hall.

I laughed so hard with this. It’s so true even today. The best books of telecommunication engineering are still the ones written by their authors dozens of years ago.

Kelly seemed to be saying that Bell Labs’ experience over the past few years demonstrated that the process of innovation could now be professionally fostered and managed with a large degree of success — and even, perhaps, with predictability. Industrial science was now working on a scale, and embracing a complexity, that Edison could never have imagined.

Innovation has a process, it can be fostered. Bell Labs demonstrated it and great companies nowadays also have their playbook.

To innovate, Kelly would agree, an institute of creative technology required the best people, Shockleys and Shannons, for instance — and it needed a lot of them, so many, as the people at the Labs used to say (borrowing a catchphrase from nuclear physics), that departments could have a “critical mass” to foster explosive ideas.

It’s really interesting also this concept. When you have many great people together ideas spark faster and they challenge each other more. Don’t build an A-team and a B-team. Hire two A-teams.

“A new device or a new invention,” Kelly once remarked, “stimulates and frequently demands other new devices and inventions for its proper use.” Just as the invention of the telephone had led to countless developments in switching and transmission, an invention like the transistor seemed to point to even more developments in switching, transmission, and computer systems.

We only remember the top innovations but we shouldn’t forget that to reach that point there has been tons of other small innovations that made it possible.

“You get paid for the seven and a half hours a day you put in here,” Kelly often told new Bell Labs employees in his speech to them on their first day, “but you get your raises and promotions on what you do in the other sixteen and a half hours.”

They were challenged a lot. They were bringing the future to the present.

“The huge industrial and military machinery of defense,” had already become an enormous business for AT&T, which entrusted its Bell Laboratories and manufacturing divisions at Western Electric to design and manufacture a vast array of secret equipment for the Army, Navy, and Air Force. Most of the industrial work orders related to radar and communications equipment; these were considered vital for national defense. These contracts earned AT&T more than revenue; they gave the company strong allies within the government that the company would need as the twentieth century reached its midpoint.

Little noted at the time but discussed privately among military leaders and AT&T executives — and eventually with Attorney General Clark and President Truman — was that a company that the U.S. government depended upon to help build up its military during the cold war was arguably worth far more intact than apart.

This was the main reason on why US government didn’t break AT&T before. Its work was so vital for the cold war that they allowed AT&T to keep being a monopoly.

The silicon solar cell generated a hurricane of publicity when it was unveiled. “The subsequent attention,” Fuller recalled, “which exceeded that of the announcement of the transistor, was unbelievable”. By the front-page newspaper headlines, one might easily imagine that the cells’ ability to effectively harness the sun meant modern society had reached a pivotal juncture, and that soon enough the world’s energy supplies would be clean and inexhaustible.

Sadly, we are still trying to reach that dream.

In contrast to the opening of the first transcontinental line some thirty-five years before, the relay system produced only a slight riffle of excitement, suggesting that the public had come to take for granted easy coast-to-coast communications. Microwave towers would shape the future of telecommunications, as well as the fate of Bell Laboratories. But at this point, nobody could see how.

In contrast with the solar cell it’s funny to see how microwave towers didn’t generated the same enthusiasm on the American public. Those towers were going to make mobile phones possible, but nobody still knew it.

The project was given the name TAT-1; it was the first transatlantic phone cable, a joint project of AT&T and the British Post Office, that was intended to carry thirty-six phone conversations at any given time. For twenty-two years after it was first activated, its technology never failed once.

It’s amazing the reliability of the systems Bell Labs built. They always had the 40 years span on mind.

Mathews argued that Shannon’s theorem “was the mathematical basis for breaking up the Bell System.” If that was so, then perhaps Shockley’s work would be the technical basis for a breakup.

This is possibly one of the most insightful thought of the book. AT&T fought for not being broken up for years. However Shannon’s work removed the need of having all the systems in one company. It opened the possibility of a network. The transistor executed that. Different companies could now start working together and transmitting information.

Humans all suffered from a terrible habit of shoving new ideas into old paradigms. “Everyone faces the future with their eyes firmly on the past,” Pierce said, “and they don’t see what’s going to happen next.”

“It pleased us that the satellite did no more nor less than just exactly what it was designed to do, but we expected that,” Pierce later remarked. What did surprise him, however, was Telstar’s “human impact.” On the day after the launch, the New York Times called it a communications feat “regarded as rivaling in significance the first telegraphed transmission by Samuel F. B. Morse more than a century ago.”

It was in fact a huge milestone. Pierce was another of the great innovators at Bell Labs. At the end satellite communication didn’t advance as fast as they would like because government didn’t want private companies to go into space. They decided it was a national interest. I wonder if we would be in a more advanced scenario if government had allowed them.

Fairchild had been established after its principal engineers, Robert Noyce and Gordon Moore, had fled Bill Shockley’s unhappy company along with several other colleagues to start a company of their own.

And that’s when Silicon Valley starts. All were members of Bell Labs ;)

But in just a few years’ time, the integrated circuit would represent something new for Bell Labs: a moment when a hugely important advance in solid-state engineering, though built upon the scientific discoveries at the Labs, had occurred elsewhere.

“We had all the elements to make an integrated circuit,” Tanenbaum adds. “And all the processes — diffusion, photolithography — were developed at Bell Labs. But nobody had the foresight except Noyce and Kilby.”

I can imagine their sad and fearful faces. Great innovations were starting to happen outside Bell Labs. They were no longer the innovation monopoly.

Picturephone calls required such tremendous (and costly) bandwidth that long-distance service was out of the question. For all these reasons, the technology couldn’t attract enough users to attract even more users. “To start up a service, you have to think about: I have one, you don’t have one — so I can’t talk to you,” Irwin Dorros says. “So I can only talk to you if you have one. So how do you get a critical mass of people that have them?” Many years later, a computer engineer named Robert Metcalfe would surmise that the value of a networked device increases dramatically as the number of people using the network grows. The larger the network, in other words, the higher the value of a device on that network to each user. This formulation — sometimes known as Metcalfe’s law — can help explain the immense appeal of the telephone system and Internet.

Another moment of the book where the pieces you have studied start to come together. Metcalfe’s law is so right and so little taken into account by current startups.

To an innovator, being early is not necessarily different from being wrong.

AT THE PRECISE MOMENT that optical systems were ready to be field-tested, a group of Bell Labs engineers were putting the final touches on a test system for mobile phones. The two technologies were not in a race. One had moved fast and the other slow. Whereas lasers and optical fiber represented the culmination of fifteen years of rapid innovation, mobile phones had undergone a longer, stop-and-start evolution.

Ring and Young hadn’t used the word “cellular” in their presentation. Nevertheless what they outlined — in the honeycomb of hexagons and repeating frequencies — was exactly that. Those hexagons were cells.

The FCC had other ideas. In the late 1950s, the commissioners awarded a large block of radio frequencies to television broadcasters. The broadcasters were to create eighty new channels in the UHF range. Had it been given to cellular service instead, which requires less bandwidth than TV, the same block of spectrum could have created as many as eight hundred or a thousand new phone channels (Each channel, in turn, could serve many mobile phone users.) It was a decision that maddened John Pierce, who was a fierce advocate for mobile radio and believed that wireless phones would someday be small and portable, like a transistor radio. Pierce’s notion seemed utopian to many radio engineers at Bell Labs. Most considered mobile phones as necessarily bulky and limited to cars, due to the power required to transmit signals from the phone to a nearby antenna. Pierce, in any event, wryly observed that “the FCC has decided pretty clearly that what the American people want is mass communication rather than individual communication.” In choosing television over telephony, Pierce thought the FCC had picked a communications technology that suppresses individual expression rather than encouraging it.

We are talking about the late 50’s. We could have had mobile phones by then; but the FCC gave the frequencies to television. It’s amazing the vision and passion of Pierce.

The thing about Bell Labs, Frenkiel remarks, was that it could spend millions of dollars — or even $100 million, which was what AT&T would spend on cellular before it went to market — on a technology that offered little guarantee it would succeed technologically or economically. Indeed, a marketing study commissioned by AT&T in the fall of 1971 informed its team that “there was no market for mobile phones at any price.” Neither man agreed with that assessment.

“You have to understand,” Joel Engel says of the entire effort, “we were all very young, we were unscarred by failure. So we always knew it was going to work.” Not all of the AT&T executives were as optimistic. But anyone worrying that the cellular project might face the same disastrous fate as the Picturephone might see that it had one advantage. A Picturephone was only valuable if everyone else had a Picturephone. But cellular users didn’t only talk to other cellular users. They could talk to anyone in the national or global network. The only difference was that they could move.

One necessary piece of hardware for this logic was integrated circuits, those silicon chips on which a tiny circuit and thousands of transistors could be etched. They had only been developed a few years before Frenkiel’s mobile work at the Labs. And then, as the cellular team at Bell Labs began working on its FCC proposal, a Santa Clara, California, semiconductor company named Intel — formed by Robert Noyce and Gordon Moore, both refugees from Bill Shockley’s first semiconductor company — began producing a revolutionary integrated circuit called the 4004 microprocessor. Measuring only one-eighth by one-sixteenth of an inch, and containing 2,300 transistors, the 4004 was essentially a tiny, powerful computer. It was the first generation of devices that, when inserted into a mobile phone unit, could do a host of essential and highly complex calculations.

Should a cellular phone have a dial tone? Porter made a radical suggestion that it shouldn’t. A caller should dial a number and then push “send.” That way, the mobile caller would be less rushed; also, the call would be connected for a shorter time, thus putting less strain on the network. That this idea — dial, then send — would later prove crucial to texting technology was not even considered.

Motorola claimed that AT&T would enter the cellular market and use its monopoly power to crush any competition. Not long after AT&T submitted its proposal, the company announced that it would only seek permission to build and operate cellular networks. “The company felt it had to make some concession, so they said they would not make handsets,” Dick Frenkiel recalls. Thus the handset business would be opened up to companies like Motorola or Japanese vendors. Such moves were meant to appease regulators concerned about competition.

The Chicago tests of fiber and cellular were largely completed by the late 1970s. Bell Labs executives then began planning for a major installation of fiber along the northeast corridor. As for mobile phones, AT&T planned a rollout in several cities — pending a green light from the FCC. By 1980, the success of both technologies seemed assured.

20 years after some of the mobile technology was ready, it was successfully tested in Chicago with thousands of users. 20 years! What would have happened if the FCC would have given those frequencies to mobile instead of TV in the late 50's?

The future, Shannon predicted, would depend on “the business of collecting information and the business of transmitting it from one point to another, and perhaps most important of all, the business of processing it — using it to replace man at semi-rote operation[s] at a factory … even the replacement of man in the things that we almost think of as creative, things like doing mathematics or translating languages.”

So true even today. The best current companies are the ones who collect and transmit the information on the best way possible. Shannon was really a visionary.

It may have been the case that Shannon, like Shockley, deserved a Nobel Prize. But the Nobel is not awarded for mathematics or engineering. In the mid-1980s, however, an award was established in Japan known as the Kyoto Prize that was meant for outstanding contributions in the field of mathematics. Shannon was voted the first recipient. “I don’t know how history is taught here in Japan,” he told the audience when he traveled there in 1985 to give an acceptance speech, “but in the United States in my college days, most of the time was spent on the study of political leaders and wars — Caesars, Napoleons, and Hitlers. I think this is totally wrong. The important people and events of history are the thinkers and innovators, the Darwins, Newtons, Beethovens whose work continues to grow in influence in a positive fashion.”

Shannon also conveyed little doubt that machines would soon outpace humans in some respects. Forty years before, he had been one of the first to pursue a computerized chess program; now, in the 1986 Kyoto speech, he noted that chess programs had become so sophisticated that they could beat chess masters. He believed they would soon beat grandmasters. And after that he believed they would win a prize by dethroning a world champion. “If I were a betting man,” he said, “I would bet that this prize will be won before the year 2001.”

Deep Blue (IBM) defeated Kasparov in 1997.

What’s more, a company that had always focused on building things to last three or four decades was now engaged in a business where products and ideas became dated after three or four years.

This was one of the greatest challenges of AT&T and Bell Labs. Changes were happening so fast that they couldn’t plan for the long term, they had to fight the short term. This is a hard mentality change.

By a number of measures — patents and awards, for instance — the company still retained a first-rate industrial laboratory with a skilled staff. And from the start, the prospects for Lucent and Lucent’s Bell Labs were considered promising. The company would design and build the next generation of wireless and wireline equipment. But things went even better than expected, and Lucent’s first few years proved to be the kind of fairy tale that the business press and financial investors adore.

A host of companies embarked on an extraordinary buildout of the country’s telecommunications and data infrastructure; Lucent, in turn, began reaping enormous profits. Just two years after it split from AT&T, Lucent’s stock valuation — $98.5 billion — was higher than its onetime parent.

After AT&T was split, Lucent’s Bell Labs kept innovating and selling those innovations to companies all around the world. The 1990s were great for them, but after the 2000s crash they had to merge with Alcatel. They still produce lots of scientific innovations.

What seems more likely, as the science writer Steven Johnson has noted in a broad study of scientific innovations, is that creative environments that foster a rich exchange of ideas are far more important in eliciting important new insights than are the forces of competition.

Agreed. Great environments are everything.