For-Profit Micro Focused Research Organizations: A Proposal

July 17, 2023

TW: sarcasm.

Today, most research is done by academic labs funded mainly by the government. Many articles have been written on the shortcomings with academic research: Sam Rodriques recently had a nice post about how academia is ultimately an educational institution, and how this limits the quality of academic research. (It’s worth a read; I’ve written about these issues from a few angles, and will probably write more at a later date.)

The major alternative to academic research that people put forward is focused research organizations (FROs): large, non-profit research organizations capable of tackling big unsolved problems. These organizations, similar in scope and ambition to e.g. CERN or LIGO, are envisioned to operate with a budget of $20–100M over five years, making them substantially larger and more expensive than a single academic lab. This model is still being tested, but it seems likely that some version of FROs will prove effective for appropriately sized problems.

But FROs have some disadvantages, too: they represent a significant investment on the part of funders, and so it’s important to choose projects where there’s a high likelihood of impact in the given area. (In contrast, it’s expected that most new academic labs will focus on high-risk projects, and pivot if things don’t work out in a few years.) In this piece, I propose a new form of scientific organization that combines aspects of both FROs and academic labs: for-profit micro focused research organizations (FPµFROs).

The key insight behind FPµFROs is that existing financial markets could be used to fund scientific research when there is a realistic possibility for profit as a result of the research. This means that FPµFROs need not be funded by the government or philanthropic spending, but could instead raise capital from e.g. venture capitalists or angel investors, who have access to substantially more money and are used to making high-risk, high-reward investments.

FPµFROs would also be smaller and more nimble than full-fledged FROs, able to tackle high-risk problems just like academia. But unlike academic labs, FPµFROs would be able to spend more freely and hire more aggressively, thus circumventing the human capital issues that plague academic research. While most academic labs are staffed entirely with inexperienced trainees (as Rodriques notes above), FPµFROs could hire experienced scientists, engineers, and programmers, thus accelerating the rate of scientific progress.

One limitation of the FPµFRO model is that research would need to be profitable within a reasonable time frame. But this limitation might actually be a blessing in disguise: the need for profitability means that FPµFROs would be incentivized to provide real value to firms, thus preventing useless research through the magic of Adam Smith’s invisible hand.

Another disadvantage of FPµFROs is that they must be able to achieve success with relatively little funding (probably around $10M; big for academia, but small compared to a FRO). This means that their projects would have to be modest in scope. I think this is probably a blessing in disguise, though. Consider the following advice from Paul Graham:

Empirically, the way to do really big things seems to be to start with deceptively small things.… Maybe it's a bad idea to have really big ambitions initially, because the bigger your ambition, the longer it's going to take, and the further you project into the future, the more likely you'll get it wrong.

Thus, the need for FPµFROs to focus on getting a single “minimal viable product” right might be very helpful, and could even lead to more impactful firms later on.

In conclusion, FPµFROs could combine the best qualities of academic labs and FROs: they would be agile and risk-tolerant, like academic labs, but properly incentivized to produce useful research instead of publishing papers, like FROs. This novel model should be investigated further as a mechanism for generating new scientific discoveries at scale with immediate short-term utility.

* * *

Hopefully it’s clear by now that this is a joke: an FPµFRO is just a startup.

The point of this piece isn’t to criticize FROs or academia: both have their unique advantages relative to startups, and much has been written about the relative advantages and disadvantages of different sorts of research institutions (e.g.).

Rather, I want to remind people that startups can do really good scientific work, something that many people seem to forget. It’s true that basic research can be a public good, and something that’s difficult to monetize within a reasonable timeframe. But most research today isn’t quite this basic, which leads me to suspect that many activities today confined to academic labs could be profitably conducted in startups.

Academics are generally very skeptical of organizations motivated by profit. But all incentives are imperfect, and the drive to achieve profitability pushes companies to provide value to real customers, which is more than many academics motivated by publication or prestige ever manage to achieve. It seems likely that for organizations focused on applied research, profit is the least bad incentive.

I’ll close with a quote from Eric Gilliam’s recent essay on a new model for “deep tech” startups:

Our corporate R&D labs in most industries have taken a step back in how “basic” their research is. Meanwhile, what universities call ‘applied’ research has become much less applied than it used to be. This ‘middle’ of the deep tech pipeline has been hollowed out.

What Eric proposes in his piece, and what I’m arguing here, is that scientific startups can help fill this void: not by replacing FROs and academic research, but by complementing them.

Thanks to Ari Wagen for reading a draft of this piece.

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