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Comment by rmrfstar | Hacker News Reader

GDP growth comes from productivity growth. Productivity growth comes from research and development.

Michael Pearson [1], a 23 year McKinsey veteran pharma CEO, claimed that R&D was "inefficient". It is just mind blowing that people see this and don't panic.

We are allowing ourselves to be ruled by mediocre spreadsheet jockeys.

[1] https://en.wikipedia.org/wiki/J._Michael_Pearson

[2] https://dealbook.nytimes.com/2013/09/02/in-a-new-book-mckins...

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The idea that r&d is inefficient is not unreasonable. the reality behind valeant's demise is more complex. valeant initially began its strategy of buying cheap, cash flow generating assets. But as time went on, they ran out of low hanging fruit as asset prices rose and deals became harder to find. to generate revenue growth and support their growing debt balance, they resorted to unethical, and illegal, tactics such as raising prices and defrauding insurance companies into reimbursing their products.

People didn't "panic", but the markets and industry did certainly react to his ideas and behavior - the pharma company he ran (Valeant) tanked and he was ousted as CEO.

They reacted to his public acknowledgement of private policy, not the policy itself. He was just parroting this McKinsey memo from 2010 [1].

R&D in the United States is dangerously neglected.

[1] https://www.mckinsey.com/industries/pharmaceuticals-and-medi...

R&D is done via acquisitions, basically outsourced to startups. Probably "more efficient this way". (Which is kind of true, after all if the big incumbent buys the competition, there's no real incentive to really upgrade their offering, as they just bought that too, and they can do a small symbolic upgrade. Plus eventually do the regular run of the mill, business as usual, do what everyone else does around the world, 0 risk course of action thing.)

Freakanomics did an interesting episode on this indicating that as companies mature they have to focus more on “maintenance” of existing business rather than R&D. Acquiring smaller businesses becomes a natural way of investing in R&D

https://freakonomics.com/podcast/in-praise-of-maintenance/

While I agree that R&D can be a major driver, it’s not the sole way to increase productivity. Making existing processes more efficiently is also a means to increase productivity, often with more immediate ROI and less risk than R&D. I have a feeling that may be the “inefficiencies” he was alluding to

Well, of course, from a specific view point on short-term to reap the most profits of a mature sector, R&D is not needed. (Let's say for Boeing, just sell the same plane tweaked a bit, don't spend and bet big on a new design.) But then on long-term the company just gets disrupted (oh damn, no pun intended). And for McKinsey it doesn't matter which company they give advice to.

Yeah, but you don't grow GDP 5% per year by shaving basis points off of vacuum tube manufacturing costs.

You grow 5% per year by putting physicists, chemists, and engineers under one roof and letting them invent transistors. Society at large will thank you, and the builders/makers/hackers doing dope shit will thank you.

R&D is definitely necessary for long term growth but I think you might be surprised how much process improvements can improve productivity.

In a previous role as an industrial/process engineer, it wasn’t unheard of to productivity increases approaching 20% for relatively little capital investment

Just because R&D is inefficient (it is almost by definition). It does not follow therefore that R&D is uneconomic. Though sometimes the government has to carry the cost.

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