The Idea Factory: Bell Labs and the Great Age of American Innovation

Idea Factory imageOne day in late January 1997, 87-year-old John Pierce – who had spent his career at Bell Labs before becoming Chief Engineer at the Jet Propulsion Laboratory – wrote out in large capital letters the question that Jon Gertner attempts to answer in The Idea Factory: “CAN WE LEARN SOMETHING FROM THE EXAMPLE OF BELL LABS?”

For if innovation and creativity are the coin of the realm in business, the twin grails that businesses seek to beat their competition and thrive through change and chaos, then it behooves us to look at the organization that was perhaps the most creative and innovative that the United States has ever produced. Where, as Gertner puts it “the future, which is what we now happen to call the present, was conceived and designed.”

How creative and innovative was it? Well, between 1937 to 2018, it won the Nobel Prize nine times and the Turing Award (widely called “the Nobel Prize of Computing”) four times.

Heady stuff, so let’s put it in terms you can hold in your hands. Like the cellphone that you may be reading this review on. Without Bell Labs, there are no cell phones. Not only did they invent cellular phone technology, and not only did they invent communications satellites (to carry your calls on), but they even invented touchtone technology so your phone didn’t have to have some big honking rotary dial on it.

Heck this review itself might not exist without Bell Labs, because they also invented the Unix operating system, which is the most widely used operating system across all forms of computing systems – and therefore probably ran the computer we used to write it and the server we posted it to for you to access.

And they also invented the C programming language which is used to develop browsers and desktop applications (most of the applications by Adobe are developed using C programming language for example), so it’s very likely that the applications we used to write this review itself wouldn’t have existed without Bell Labs, and the browser we used to navigate the internet to post the review and that you used to find it, wouldn’t have existed either.

Oh and they also invented the transistor and the laser and solar cells and about 33,000 other things that they have patents for – so yeah, it’s fair to say that life as we know it wouldn’t exist if Bell Labs hadn’t been as innovative and creative as it clearly was.

So what can we learn?

Well on the one hand, nothing.

Because as Gertner explains so well in The Idea Factory, so much of what Bell Labs was able to accomplish was because it was unique. Starting with the fact that Bell Labs was part of the Bell System, which was the phone company. None of this Verizon or Sprint or “bundle it with your cable service”. They were it. You bought your phone service from them (via Bell Telphone) you bought your actual phone from them (through Western Electric, a wholly owned subsidiary) and those two entities licensed all their technology from Bell Labs – which you paid for as well. In plainer terms, they were a monopoly – with the competition-crushing domination one associates with that term, but also with the perks that allowed for the innovation.

Perks like knowing that their market was going to keep expanding, which meant: First, that they would have an ever-increasing revenue stream. But second, that they would also have an almost unending demand for product innovation to meet the demands of that expansion. Which, third, meant that the former would be necessary to fund the latter. And therefore also fourth, that the more they innovated, the more demand they would create, requiring yet more innovation. But, of course, also more revenue.

Which was how the phone company – with Bell Labs driving it – evolved from just a product, to a utility, to finally a sort of quasi-governmental entity, utterly unique in the way it did business with consumers, businesses and the government itself.

Does that sound like your company? Yeah, I didn’t think so.

On the other hand, all those things are really just the business model. The setting for the innovation. What did they actually do to drive innovation?  

They pursued the unfettered exchange of ideas by whatever means necessary.

Like the way they set up their offices. As Gertner explains:

“The physicists and chemists and mathematicians were not meant to avoid one another … and the research people were not meant to evade the development people. By intention, everyone would be in one another’s way. Members of the technical staff would often have both laboratories and small offices – but these might be in different corridors, therefore making it necessary to walk between the two, and all but assuring a chance encounter or two with a colleague during the commute.”

In other words, creating a physical plant that drove the actual collision of different skill sets and expertise, with the understanding that out of those collisions comes innovation.

Again:

“Physical proximity … was everything. People had to be near one another. Phone calls alone wouldn’t do. Kelly had even gone so far as to create ‘branch laboratories’ at Western Electric factories so that Bell Lab scientists could get more closely involved in the transition of their work from development to manufacture.”

Again, the collision of different perspectives, different skill sets, different ways of thinking. Force the people theorizing about the big problems to bump up against the people making the actual physical tools that would execute those ideas in the real world.

Because, as Gertner explains late in the book, that’s where the real competitive advantage lies:

It is now received wisdom that innovation and competitiveness are closely linked. Companies that are good at innovating are good at competing in the market; the uncompromising nature of the market, in turn, is a powerful force on companies to innovate. But Bell Labs’ history demonstrates that the truth is actually far more complicated. It also suggested that we tend to misinterpret the value of markets. 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. Indeed, one might concede that market competition has been superb at giving consumers incremental and appealing improvements. But that does not mean it has been good at prompting huge advances (such as those at Bell Labs, as well as those that allowed for the creation of the Internet, for instance, or even earlier, antibiotics). It’s the latter types that pay to society the biggest and most lasting dividends.

And that, in the end, is the real question; do we want to be a people who make huge advances or are we content with small incremental improvements and the companies that produce them? Companies that we can flip or cash out of with an absurd payday for a select few – but that don’t do the big audacious things that we used to do?

And because it is, it is what makes Jon Gertner’s The Idea Factory so important.

Not because it tells us how to recreate Bell Labs.

But because it inspires us to aim for what Bell Labs aimed for.

The Idea Factory: Bell Labs and the Great Age of American Innovation by Jon Gertner was published by Vintage on 03/15/2012 – order it from Amazon here or Barnes & Noble here – or pick it up at your local bookseller (find one here).

Please be advised that The Agency Review is an Amazon Associate and as such earns a commission from qualifying purchases

You May Also Enjoy:

The Silo Effect
by Gillian Tett
Insanely Simple by Ken Segall
A Beautiful Constraint
by Adam Morgan & Mark Barden