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Comment by paxys | Hacker News Reader

When I worked at Qualcomm a while ago the company had two major business lines. One of them was developing and selling a line of mobile chipsets (Snapdragon) to a lot of the major players in the market, for which they employed thousands of top engineers and researchers. The other was licensing their CDMA patents to all of the players in the market, and this org was run entirely by lawyers. The second business made significantly more money than the first.

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The funny thing is that CDMA was a Russian invention, and was first implemented in a mobile phone in 1957.

"In the Soviet Union (USSR), the first work devoted to this subject was published in 1935 by Dmitry Ageev... The technology of CDMA was used in 1957, when the young military radio engineer Leonid Kupriyanovich in Moscow made an experimental model of a wearable automatic mobile phone, called LK-1 by him, with a base station."

https://en.m.wikipedia.org/wiki/Cdma

And yet the technology was reserved exclusively for the Soviet political elite and never saw use with regular citizens.

What I'm about to say I know will sound glib, or... something... but I don't know what else to say, or even how else to say it, but after learning this, why do I want to say something along the lines of, "Communists are too stupid to make money and this kinda proves it."

Communism is an ideology that requires/promotes an incredibly naive worldview. In order for it to function properly, everyone must act in good faith, which is obviously impossible. Once the communism is established, the expectation is to believe everyone is acting in good faith, which is even more naive. Hence your observation.

Even If we ignore the actual achievements of different societies claiming they implement "ism" of one kind or another, any "ism" from XIX century regarding human behavior at scale is naive. If the theory of phlogiston went bust, it doesn't mean physics shouldn't be worked on. Even today, soft sciences are laughable.

In my observations of the world and history, the only 'ism' that works for the people, is where the real power is concentrated in the hands of as many people as possible.

As long as we create structures that concentrate power in the hands of the few, policies change and resources flow into those circles.

> concentrated in the hands of as many people as possible

Isn't that the opposite of "concentrated"?

You are correct! The right word would be "distributed"

While communism is merely a thought experiment, communism imagines a world that has entered into a post-scarcity state (which is the actual unrealistic part). Once scarcity is no longer a concern, it is believed that people acting in bad faith won't be able to exert any control.

The bad faith is recognized in communism. It is why it is suggested that nations must first move to socialism in order to pave the way to post-scarcity. It was believed that private interests will create artificial scarcity even after we are able to technically achieve post-scarcity if the public doesn't first gain control over the means of production.

I’m not sure your 2nd point is that controversial. Many clear examples of companies manufacturing scarcity in order to create profits - light bulbs being an easy example.

That’s not manufactured scarcity, that’s planned obsolescence. Those are different things.

Yes, sure, but the two kind of go hand in hand. Media copyright, for example, is manufactured scarcity.

That’s built on the naive assumption that people won’t seek power in a post scarcity world.

That's like saying that capitalism has the naive assumption that people won't try to achieve post-scarcity. It is not a meaningful statement.

Why do you believe there is such an assumption? Elon Musk assumes people will try to achieve a post-scarcity society and he’s nonetheless gone from living in a YMCA to being the richest man on Earth.

Do you really think he stayed at the YMCA for any other reason than "he wanted to"?

He comes from money, and would have had no problem living anywhere he liked.

Just read his wikipedia page:

> In 1995, Musk, his brother Kimbal, and Greg Kouri founded web software company Zip2 with funds borrowed from Musk's father.

If the YMCA story is supposed to signify "rags", then it's a carefully constructed image and nothing else.

Again, the assumptions don't tell us anything meaningful. If, hypothetically, we did achieve post-scarcity and pushed out capitalism in doing so, so be it. If that were to happen and then "bad actors" took back control of the capital, returning us to capitalism, so be. These models don't have to be ever-present, they don't have feelings, they are only descriptions about the state of the world at a given moment in time. Whether or not these forces described are in play is irrelevant.

Irrelevant to whom? It certainly seems relevant to the point the parent was making.

Irrelevant to what defines these models. The parent was taking the conversation off-topic.

Capitalism is only marginally less naive. It assumes that markets behave in a way that optimizes for the public good and that regulatory mechanisms will be independent and without conflict of interest with regards to the corporations themselves. Both extremely naive.

Markets optimize for the needs of their participants. Most of the time it aligns with public good.

The regulatory mechanism is what and from whom the participants are willing to purchase.

> Most of the time it aligns with public good

Fully disagree here. I could list a hundred egregious examples where this isn't true for major aspects of life, but it's late and I'm tired of arguing on the internet. Perhaps tomorrow I'll respond with examples.

The contest is if other people can list _more_ things where it _does_ align. And even if the misalignment is more frequent than alignment, are there any other systems that are better? I agreed with the general sentiment of your post and agree there are a lot of wrongly incentivized bahaviors in capitalism. It's just that finding workable alternatives is a challenge in of itself.

Reminds me of the quote that "democracy is the worst form of government – except for all the others that have been tried."

Just replace democracy with capitalism and government with market.

No it doesn't. FFS bakers used to adulterate their flour with crap like chalk because it was cheaper. And there's many many examples of things like that. The market optimizes for price and only in scenarios where competition doesnt have a high bar.

> Markets optimize for the needs of their participants

They optimize for what they want, not what they need, which is a big difference. They would probably align with public good if it was the latter. Also, they optimize for what people who have money want.

Participants want comfort (which we can't blame them for) and are not incentivized to solve poverty.

Not saying that capitalism did not bring good stuff (won't state it neither), but part of the current result is global warming, pollution and the existence of people living in bad conditions.

> but part of the current result is global warming

Global warming is rather mostly a consequence of overpopulation. In the past, people often died of starvation or illnesses. "Unluckily" capitalism managed to reduce these problems by a lot.

> and the existence of people living in bad conditions.

In most communist countries, the living conditions were worse, so this is rather again a success story of capitalism.

Speaking of naive

Not sure where you learned this, but capitalism doesn’t assume either of those things.

Capitalism does not assume the market optimize for the public good. It assumes when each party optimizes for their own self-interest, that optimizes resource use.

And in terms of regulatory capture/corruption, I hope you're not assuming that it's somehow unique to capitalism? In fact, as the Soviet Union and China have shown, corruption is rather greater under those systems.

Probably the best way to explain would be to say that capitalism as an ideology optimises for the personal good, while communism optimises for the common good.

As we probably know from the history of 19th/20th centuries, taken to their extreme these ideologies can be highly dangerous.

> while communism optimises for the common good

Communism mainly optimises for the good of the high ranking party members and other apparatchiks in charge they might occasionally throw some scraps to ordinary people but I don't see how can it be considered inherently superior to capitalism in this regard based on real world example.

While following 'capitalist policies' have generally resulted in a significant overall increase in the 'common good' it is unquestionably that it has also caused many terrible tragedies. However pretty much the only positive thing about communism that I can think of is that the fear of it spreading encouraged many western governments to enact progressive social, political and economical reforms (it's debatable whether this was actually a significant factor, though).

> Communism mainly optimises for the good of the high ranking party members

This happens when ideology meets the reality of dealing with people, who are mostly egoistic. Pure capitalism ideology leads into another trap: the one of oligarchic rule, with smaller groups of egoists winning the game of monopoly.

A less radical version of communism, the one implemented in late USSR, where the state owns and plans everything for everyone, while proving some common good benefits (medicine, education, etc) also has a couple of fundamental problems.

One is the economical problem of having to plan everything for everyone. A book called "Red Plenty" covers this really well, as well as some bits of a math behind it (linear programming, etc). In market-based economies these problems sort of go away. Until one has to deal with monopolies, that is.

I don't know if somebody has an explanation for the other problem, political in nature. Communists and modern "communist-socialist" states seem to always insist on political monopoly, which makes it impossible for people to provide fast feedback to policy-makers.

So it seems that an optimal balance achieved by "enlightened democratic capitalism", where the exploitive (and economically more efficient) nature of capitalism is balanced by democratic feedback.

I'd argue that under capitalism the bottom 5% still live better than the bottom 50% under communism. Altough, that doesn't correct for the technological/geographical differences.

Well, the science of political economy is not really science so hard to tell. :-)

It seems, though, that capitalism does allow for faster wealth generation. Given proper corrections and balances, of course.

I can name quite a lot of countries that never went the socialism way, but are not rich in any sense of the word.

Capitalism is less naive in that it does not assume good faith. That's a huge difference.

Instead, it naively assumes rationality

It does not assume rationality. Rather, the assumption is that rational behaviour is of your advantage, which is in my opinion a very sensible assumption.

I would say it aligns rationality and responsibility. You want to spend your own money badly? Fine. You just don't get to spend everyone's money badly.

This actually explains why it's necessary for Communism as an ideology to kill so many people. You can't have bad faith actors in the system because then the system ceases to function... hence executing all the bad faith actors.

Again, in theory.

> The other was licensing their CDMA patents to all of the players in the market, and this org was run entirely by lawyers.

The U.S. Constitution empowers Congress to issue patents "to promote progress in science and the useful arts." It's not supposed to be all about full employment for lawyers. When patents inhibit progress rather than promote it, they need to be cut short. Resolving this through antitrust seems like a patch - fixing a problem caused by bad government policies and too many lawyers by adding more government policies and lawyers.

Disclaimer: current employee. Purely personal opinion.

I'm curious how long ago this was? I can't find any time period where QTL (the licensing division) made more than QCT (the Snapdragon et. al division). Still, I think your statement's sentiment is the consensus-- that overall, Qualcomm is/has been the "Oracle of hardware" that milks the licensing cow.

Let's look at Q2 '22, Q2 '19, Q2 '16, Q2 '13. I choose 3-year gaps for no particular reason, simply how I personally view company timelines and how long it might take to "steer a ship", e.g. if the CEO wants to change its public perception, it might take a few years. I also choose Q2 simply because Q2 was the most recent quarter. Relatively arbitrary, but still sensible data points when talking about Qualcomm's recent history. Noteworthy also, is that Q2 '22 is about the 1 year anniversary of when the new CEO was instantiated.

($mil) | - QCT - | - QTL -- | QTL % of tot rev

--------------------------------------------

Q2 '13 | $3,916 | $2,057 | 33.6%

--------------------------------------------

Q2 '16 | $3,337 | $2,135 | 38.5%

--------------------------------------------

Q2 '19 | $3,722 | $1,122 | 22.9%

--------------------------------------------

Q2 '22 | $9,548 | $1,580 | 16.5%

Licensing revenue has actually been flat or on the decline recently. Even in business outlooks, Qualcomm usually directly says "our goal is to maintain QTL" while heavily expanding on QCT, somewhat implying an attempt to cast off this "ran by lawyers" reputation.

Time will tell, I suppose.

[1] https://d1io3yog0oux5.cloudfront.net/_ef937ef9314613934ed123...

[2] https://d1io3yog0oux5.cloudfront.net/_ef937ef9314613934ed123...

[3] https://d1io3yog0oux5.cloudfront.net/_ef937ef9314613934ed123...

[4] https://d1io3yog0oux5.cloudfront.net/_ef937ef9314613934ed123...

I'm guessing the licensing is much more profitable. Especially if, accounting-wise, all the costs of developing the the patents is attributed to the chip division.

That would make sense. You touch on an interesting point-- that the chips themselves might be somewhat of a loss-leader to just get them out the door, where the licenses *on those chips* are the real money maker. While that might make OP's original statement ("a long time ago... made more money") true, these days it is no longer true.

QTL in Q2 '13 had $1800mil EBT with 88% of revenue contributing to earnings. EIGHTY EIGHT PERCENT. Holy cow. QCT in that same year had $600mil EBT with 17%.

For comparison, QTL in Q2 '22 had $1540mil EBT with 74% of revenue contributing to earnings. QCT in that same year had $3340mil EBT with 35%.

I guess really you can only squeeze so much before the market gets annoyed. Given these numbers, I can't see how QCT would be a loss-leader. Why else would the margins on them be increasing, and margins on QTL be decreasing?

My point is, I believe things aren't as lawyer-y as before. The Qualcomm of today focuses a lot more on its QCT division. Licensing is still obviously there, and will always be an incredibly nice moat, but it's not the suffocating "shakedown" it might have been 10 years ago.

Yes, last I checked QTL's revenue was much lower yet profit higher than QCT.

Looking at Q2 is misleading. QTL revenue has increased from 4.591B in 2019 to 6.320B in 2021. https://investor.qualcomm.com/segments/qtl. Qualcomm is heavily represented in lot of industry standards. Every "if condition" is patented and counted as part of any standards. Standards group decisions are highly political and not completely based on technical merits. With Qualcommm political power, they are able to include many of their proposals in standards which end up getting them royalty.

I disagree that it's misleading. Or maybe, yes, it's misleading, but in the opposite way you think-- misleading investors that it's an expanding revenue stream. Shift your view further to FY13. If we're making the claim of a "shakedown over [2] decades" we should look at the past decade.

I use Q2 '22 specifically because it's a recent quarter that's most likely to reflect the vision of the current CEO. Given that my thesis is "current Qualcomm is different", I think it's apropos to talk about current results. And my yearly sampling is based off of the assumption that the general business cycle is periodic YoY (i.e. Q2 2020 is roughly similar in growth rates to Q2 2019, barring anything massive like a pandemic haha lol haha).

Furthermore, I also think it's important to look at breakdowns of % of revenues by division, to see how much a company relies on any specific source.

---- | QTL Rev | QTL EBT | QTL % as non-GAAP Rev

FY13 | $7,554 | $6,590 | 69%

-------------------------------

FY14 | $7,569 | $6,590 | 65%

-------------------------------

FY15 | $7,947 | $6,882 | 74%

-------------------------------

FY16 | $7,664 | $6,528 | 80%

-------------------------------

FY17 | $6,445 | $5,175 | 69%

-------------------------------

FY18 | $5,163 | $3,525 | 64%

-------------------------------

FY19 | $4,591 | $2,954 | 58%

-------------------------------

FY20 | $5,028 | $3,442 | 50%

-------------------------------

FY21 | $6,320 | $4,627 | 34%

The pie was rather small back then, and the licensing slice was HUGE. Nowadays, the exact quantity of licensing revenue is actually just reverting to the mean, and the slice is actually decreasing. You can't go by the growth rates you're given there.

Links to FY13--FY19 here. BTW you can skip every other year, since FYXX tends to report FY(XX-1) as well.

https://investor.qualcomm.com/financial-information/historic...

Qualcomm is well represented b/c it's a wireless pioneer who helped define the wireless industry as we know it today. Why do you think SSO's are "highly political"? Do you have any faintest idea how a patent becomes a SEP -- or how royalties are collected? or are you even aware of the fact that Qualcomm who more or less single handledly created the CDMA standard is just a leading patent holder in recent wirelss standard.

I get that there were some aspects of Qualcomm licensing practices weren't quite kosher, but seems there are lot of folks parroting talking points from Apple who orchestrated the original lawsuit along with FTC behind the door. If you want to talk about "political power," we could talk about Apple all day.

Aren't those lawyers frequently patent lawyers, meaning often are engineers themselves? Electrical Engineering in particular, that's the hottest undergrad degree to then become a patent lawyer.

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