Business: $5 Billion Investment in Abundance

THE AGE of RESEARCH

IN a South Side Chicago building, three miles from the stadium where the world’s first atomic pile went into action 14 years ago, a shrilling alarm bell signaled the birth last week of U.S. industry’s Atomic Age. As a white-smocked scientist twisted the knobs on a control panel outside a monolithic concrete cubicle, a lighted dial flashed: REACTOR ON. Thus the world’s first nuclear reactor devoted exclusively to industrial research went into operation at the Illinois Institute of Technology’s Armour Research Foundation.

The $700,000 reactor, owned jointly by the Armour foundation and 24 companies whose interests extend from food preserving to watchmaking, will hasten the new knowledge on which U.S. industry is building an Atomic Age technology. In the atomic furnace, physicists will explore the structure of metals, search for new plastics, investigate new ways of refining oil, new uses for rubber. Radioisotopes from the 50,000-watt reactor will be used by industry as tracers to track friction damage in machinery, test new chemical carriers for cancer therapy, hunt new manufacturing techniques in fields ranging from rubber to building materials.

The Chicago reactor is a concrete-shielded symbol of an economic force more far-reaching even than atomic energy. The force: research in industry. In the past 15 years a torrent of technological change has brought the U.S. greater material advances than any other nation has experienced in all history. With every breakthrough in the laboratory, industry has turned the new knowledge into new products for a society whose inventiveness has made achievement the bright converse of obsolescence.

From the test tube have come drugs that helped add eight years to life expectancy in the U.S. (from 62 to 70 at birth) since 1941, boosted population. At the same time, to the discomfiture of Malthusians, new fertilizers, insecticides and other chemicals have helped pile up the greatest food surpluses ever. Man has learned to cruise undersea on nuclear power, fly at supersonic speeds; research has trebled the number of metals used by industry, made diamonds from common carbon (see cut), and conjured up thousands of new products.

The revolution in living wrought by research is just beginning. Within a few years these things will be available:

¶ Houses with centrally controlled pushbutton windows, electronic heating, cooling and refrigeration systems that work without moving parts, electroluminescent lighting from sheets of glass and metal.

¶ Food sterilized by atomic radiation so that it will keep indefinitely without refrigeration.

¶ Chemicals that will kill all plants in a field except those the farmer wants to grow.

¶Telephones with automatic worldwide dialing, TV screens for face-to-face phone conversations.

¶ Electronic computers that will design bridges and highways, specify the construction materials, estimate building costs and future revenues from tolls.

¶ Home laundry equipment that will automatically pick up, sort, clean, iron and fold the wash; cleaning machines that will wash, rinse and dry a kitchen floor in minutes.

To hasten the flow of technology from laboratory to living room, some 3,000 U.S. companies today have their own research facilities, employ 500,000 research workers, including 100,000 scientists. Across the U.S., new research plants are springing up almost as fast as factories. In the past two months alone, General Motors dedicated its $100 million Technical Center in Detroit; U.S. Steel opened a $10 million laboratory at Monroeville Pa.; Union Carbide & Carbon Corp. moved into a $6,000,000 Parma (Ohio) research complex; General Electric completed a $5,000,000 Cleveland laboratory for the study of “psychological and physiological effects of lighting on humans, animals and plants.” Other multimillion-dollar research centers are being blueprinted by Ford Motor, General Dynamics’ General Atomic Division, Westinghouse Electric, Koppers, Gulf Oil.

From the starveling stepchild of industry, scientific experimentation has become an industry in itself−perhaps the key industry. By constantly creating new products, and thus new markets, research has added a dynamic new force to the economy to help keep the boom rolling. Once industries competed for a market that seemed clearly limited by consumers’ needs, and the basic needs varied little from decade to decade. Periodically, the needs were so nearly filled that the market and industrial activity declined. In the age of research, industries compete constantly to create new needs, expand their markets and increase production. Says General Electric’s Research Director C. Guy Suits: “To an increasing extent, we will determine what discoveries need to be made−and then make them.”

The U.S. today is spending $5 billion a year for research, or more in one year than in all the years from 1776 to 1933. Research expenditures by the Government, inconceivable in 1900, now total more than the entire cost of Government in that year. There were only two nonprofit scientific organizations in 1936: Battelle Memorial Institute in Columbus, Ohio and Pittsburgh’s Mellon Institute for Industrial Research, with an annual volume of $1,100,000; now such institutions total 48, take in $100 million yearly. Moreover, the total U.S. research effort is growing at the rate of 10% to 12% a year v. an average annual increase of 3% in the gross national product.

The power behind the research race is industry’s new-found ability to harness science and invention to production, systematize the search for knowledge by pressing the scientists into service in the industrial laboratory and project team. The swift spread of research has caused a redrawing of the traditional picture of the lone scientist or inventor experimenting in his own workshop and, with his own flash of genius, discovering a new principle and founding a new industry. Now task forces that may number hundreds are thrown into a project; with the help of such research-developed equipment as computers, they can explore in a few weeks problems that would take an unaided worker years. In Detroit, where Henry Ford once puttered with his new car in an old stable, while his wife held the lantern, Chrysler Corp. has 200 scientists and engineers assigned solely to gas-turbine engine development.

One big effect of the task-force approach has been to eliminate the rigid boundaries that once separated one science from another. Oilmen are experimenting with radiation; atomic scientists are exploring the properties of oil. The electrical industry has unearthed new chemicals, e.g., silicones, used in products ranging from synthetic rubber to children’s “silly putty.” Mathematicians have helped neurologists chart the workings of the brain. Working side by side, specialists in all fields have developed new families of alloys and plastics, found new uses for old, abundant materials.

Industry executives, who once minimized outlays for science because they were hard to justify to stockholders, play up research budgets as a powerful magnet for new capital. Reason: securities analysts and bankers have come to regard a company’s research program as one of the most significant yardsticks of its future growth and ability to keep up with−or outdistance−competition.

Chemical companies such as Dow and Monsanto, among industry’s heaviest spenders for research, trace 30% to 40% of 1956 sales volume directly to products developed through research in the past ten years; agrichemicals alone−fungicides, herbicides, insecticides, etc.−have become a $400 million-a-year industry in less than a decade. Standard Oil Co. (N.J.) estimates that every $1 invested in research will return $5. International Business Machines Corp. (research budget: $19 million) says that every product it sells today was developed from research. The U.S. as a whole, according to National Science Foundation’s Director Raymond Ewell, has earned back $2,000 to $5,000 for every $100 spent for research and development in the past 25 years.

Most industry-sponsored research falls into three categories: 1) basic−the search for new knowledge with no immediate thought of commercial application but within the general framework of the company’s interests, 2) applied−the hunt for specific information for practical purposes, and 3) development−converting theory into salable products or improved production processes.

Basic research is the least predictable and usually the cheapest. Applied research is costly, and it gets still more costly as it turns into developmental research. To test new ideas, modern industrial laboratories have all the production facilities of factories. In the big laboratories, some $25,000 to $50,000 is invested in equipment for every scientist employed. Because of this progressive cost, most companies cannot enter the research field unless they have some hope of commercial results.

Nevertheless, the companies that have delved most deeply into fundamentals have in most cases come up with the richest booty. Du Pont’s nylon came from basic research into molecular structures started in 1927 by Du Pont’s late famed Scientist Wallace Carothers. When Dr. Carothers found a way to simulate the long-chain molecules found in natural silk, Du Pont applied his findings to the development of nylon, which reached mass production in 1939, after five years and $27 million for applied research. European scientists were quick to capitalize on Carothers’ findings, developed other synthetic fibers. When Du Pont used Carothers’ research to produce Dacron and other synthetic materials, the U.S. company found that it had to buy manufacturing rights from European concerns. Du Pont’s latest dividend from Carothers’ research is rubberlike urethane foam, used in a wide variety of end products from furniture to falsies. Urethane production has increased tenfold in the past year, should reach the 100 million-lb. mark by 1960.

By giving top scientists the widest latitude, Bell Telephone Laboratories, the $113 million-a-year research arm for American Telephone & Telegraph Co. and Western Electric, has struck some of the biggest pay lodes in industrial history. In 1948 Bell Mathematician Claude Shannon, projecting earlier studies by Massachusetts Institute of Technology’s Norbert Wiener, published Communication Theory, a complex mathematical scheme for measuring information content in communications, as well as evaluating the performance of systems that transmit words and pictures. The theory opened new horizons in telephone and TV transmission, has already found its way into the Air Force’s Distant Early Warning (DEW) radar fence.

Another Bell breakthrough in 1948 was the discovery, after years of basic research into the structure of matter, that a solid metal such as germanium or silicon (earth’s most abundant solid element) can be made to act like a vacuum tube, i.e., it will amplify an electric signal. Result: the flea-size transistor−and a king-size new industry. Thirty-five manufacturers have already turned out 7,000,000 transistors v. 1 billion vacuum tubes now in use in the U.S., are doubling output each year. Transistors will multiply the speed of future telephone exchanges 1,000 times; they have infinitely refined and compressed the performance of electronic computers.

Through patent-licensing, most big U.S. companies share the fruits of basic research. RCA has earned enough income from royalties and Government contracts since 1947 to make its research program selfsupporting. Thousands of patents developed by Bell Labs may now be used by other companies without charge, as a result of the trustbusting consent decree signed last January by A. T. & T. and Western Electric. Eastman Kodak estimates that at least one-third of 1,800 basic studies published by its researchers have benefited industry as a whole.

Applied research also turns up rich and diversified rewards. Chrysler Corp.’s research in hydraulic pumps for cars resulted in a hospital pump that delivers liquefied natural food directly to a post-operative patient’s stomach, eliminating the need for intravenous feeding in many cases. General Motors’ development of a sensitive device to test automotive parts yielded an electronic “stethoscope” for doctors.

Applied research can often turn migraines into moneymakers. In the manufacture of chlorinated biphenyl, widely used for insecticides, Monsanto’s Anniston, Ala., plant was swamped by a useless fluid residue. But when researchers found a new product, HB-40, that uses the waste fluid to give greater flexibility to plastics, Monsanto salvaged twelve million pounds of stored-up residue, started making the onetime waste product.

Despite the task force approach, research is not a monopoly of the big companies. Many small companies that cannot afford full-scale research programs of their own can hire top outside brains to solve their scientific problems. Companies such as B. F. Goodrich and General Dynamics specialize in product development to fit other companies’ requirements. Even corporations with their own big laboratories often hand over research projects to scientific contractors such as Boston’s famed Arthur D. Little Inc. (1955 gross: $11 million), whose 800-man research staff has developed products ranging from rubber cement to a better instant coffee. Research is also farmed out to nonprofit institutions and universities, which, before World War II, had a virtual monopoly on basic research.

Some companies still contend that fundamental research should all be done on the campus, where it is free from sales-department pressure. Others work closely with universities. Du Pont helps keep in academic touch by retaining 70 university professors as consultants. Many company research centers, e.g., G.E.’s Schenectady laboratories, cultivate a “congenial” atmosphere of academic leisure. Industrial jobs frequently give top scientists greater freedom than university posts.

How does management decide whether research will pay off? Says one executive: “You’re always on a tightrope. Either you spend too little for research and your product is years out of date, or you spend too much and it’s years from production.” To cut the average ten-year time lag from test tube to cash register, most companies rigorously analyze even the most promising leads in terms of cost, marketability, timeliness and practicality, reappraise the potential new product at every stage of development. At Bell Labs, systems engineers spend years checking research developments against rival theories and the existing mechanisms they will outdate. They argue: “If it works, it’s already obsolete.”

Some companies allot to research a fixed proportion of sales (from less than 1% for transportation companies to more than 6% for big electrical and chemical manufacturers), give research directors a free rein in pursuing likely leads. Esso Research measures each venture by its “probability ratio,” i.e., the value of the potential product, multiplied by the probability of successful research, divided by the cost of the work.

Du Pont compiles its annual research budget according to the cost, duration and number of all approved projects, usually spends about 3.5% of sales (1955 research budget: $70 million). Even so, few research ventures last the course. One-third of the studies undertaken by Du Pont’s chemical department are “laboratory flops”; 50% are successful in the lab but prove impractical for production; less than 10% goes to a manufacturing division for development, and only a small fraction of these ever goes into production. RCA estimates that 90% of its research ideas are useless; from the other 10% come 80% of all the products it sells today. Says RCA Laboratories’ Vice President Douglas Ewing: “Research is never a blind alley. Learning what is not feasible is perhaps nearly as important a step forward as learning what is. Research is a process that corrects its own mistakes.”

The biggest problem for industry is the time and the money it must lavish to turn theory into product. A new amplifying device for transoceanic cable was tested for 20 years before A. T. & T. decided to install it in a sample cable. Penicillin, invented for $20,000, cost millions to prepare for commercial use. RCA had invested $50 million in TV before it reached the U.S. living room, has another $30 million tied up in color TV; telephone companies buried millions of dollars worth of coaxial cable, engineered with TV in view, long before they had network customers. Monsanto tested 15,000 chemical compounds at its Creve Coeur, Mo. laboratories to find a herbicide that would kill weed grasses but not harm corn or soybeans, spent six years and $750,000 on the product, which has yet to be marketed.

Nevertheless, say many scientists and industrial leaders, U.S. business is not investing enough for the basic research that nourishes all invention. These critics argue that industry should allot at least 10% of its research outlay for fundamental studies v. the 5% average. The U.S. Government, which underwrites 60% of the national research effort, also tends to emphasize practical rather than theoretical value. At least 93% of Government research money placed with industry goes for specific projects; $4 of every $5 in Government research grants to universities also specify applied research. Says Whirlpool-Seeger President Elisha Gray II: “The paucity of support for basic research could be our Achilles’ heel.”

Historically, the critics are right. The technological advances of the past century have stemmed from uncommitted experimentation. As G.E.’s Nobel Prizewinning Irving Langmuir points out: “Only a small part of scientific progress has resulted from a planned search for specific objectives. A much more important part has been made possible by the freedom of the scientist to follow his own curiosity in search of truth.”

But the cost of research is not the only obstacle. Many industries are cramped by the shortage of scientists. Company interviewing teams comb through the new crop of graduating students each year, and educators complain that only the rejects will be left to teach. Moreover, many potential research men shy away from science because the starting pay in industry ($700 a month for a Ph.D.) is too low.

Top research men often fear regimentation in industry. An even bigger problem is that scientists who get limited freedom to do original work often are not creative enough to use the opportunity. Research directors also argue that young U.S. scientists lack the dedication and driving intellectual curiosity of their forebears. Says RCA’s 41-year-old Dr. Ewing: “For some reason, really creative ideas come only from those under 40. Perhaps adversity and unsureness compel creativity.”

Somehow, the U.S. must increase its creativity. The nation, which has increased its energy consumption 50-fold since Jefferson’s day, will need 90% more power capacity by 1965; in that decade, say experts, fossil fuels will be so depleted that the nation must have competitively priced nuclear power. To feed and clothe 193 million population by 1975, U.S. farms will have to boost output. Spiraling metals consumption will intensify the search for new ore deposits and new ways to extract metals from clay and sea water. To meet 1965’s demand for 50% more goods and services with only 10% more manpower, automation will have to move into industry’s front line. Despite its seven-league strides into the future, science has yet to overcome scores of existing problems, from the nation’s $10 billion annual loss from rust and rot to the $2 billion yearly road-repair bill.

Almost no leader of science or industry doubts that the U.S. can and will develop the knowledge to meet the challenge through continued research.