Saturday, February 07, 2015
The VC model to R&D
There's a fascinating article about Xerox PARC (link via Hacker News) and how Xerox dropped the ball on computing (only to have Apple pick up the ball and run with it, followed closely by Microsoft).
But what most people don't realize is that Xerox was never in the computer business, and I think licensing the technology to Apple was probably a smart move. But to me, this is the key quote:
“Xerox did research outside their business model, and when you do that you should not be surprised that you have a hard time dealing with it—any more than if some bright guy at Pfizer wrote a word processor. Good luck to Pfizer getting into the word-processing business. Meanwhile, the thing that they invented that was similar to their own business—a really big machine that spit paper out—they made a lot of money on it.” And so they did. Gary Starkweather’s laser printer made billions for Xerox. It paid for every other single project at Xerox PARC, many times over.
That quote, “[i]t paid for every other single project at Xerox PARC, many times over,” is, to me, the key quote as to why large companies should always invest in research and development. Sure, not every idea will pan out, but those that do pan out, really pan out! (Heck, venture capitalists do that today—fund a bunch of projects, most of which will fail, but the ones that don't make tons of money)