The Idea Factory: Bell Labs and the Great Age of American Innovation

Bell Labs became an idea factory with loyal, long-term employees dedicated to science. In contrast, Silicon Valley is a “geography of ideas” among opportunistic engineers who, for many, commit themselves to intense work in exchange for the potential to get rich. It was this fluid movement of engineers between companies that helped Silicon Valley become and sustain itself as the world’s premier innovation hub, where creative ideas and technical know-how helped cultivate new breakthroughs in innovation.

In comparing science in the 20th century to 2020, we see a shift from basic science to more focused challenges in need of timely solutions. What had been bold thinking with extended timeframes and millions of dollars in the Bell Labs era became a more practical realization with less time, risk, and budget available to innovate. Only a few companies today can invest as AT&T did in basic research, like Google’s Alphabet, Amazon, and Facebook.  As investors and CEOs now take a tactical focus on a company’s financial performance, so too does the appetite for incremental innovations with lower levels of risk than Bell Labs did in the 20th century.

For several decades Bell Labs researched and developed new equipment, and invented communications-related devices for AT&T. It was the only serious provider of long-distance phone service in the United States until 1984 when a startup company called MCI offered its services to the public, which ultimately led to the breakup of AT&T’s monopoly.

The question back then was whether it remained in America’s best interest to have a regulated phone monopoly or adopt a deregulated playing field to encourage greater competition and advancement. The answer came on January 8, 1982, when AT&T agreed to divest itself into regional phone companies, informally known as Baby Bells, while retaining its long-distance service to compete with other providers like MCI. The U.S. Justice, in ending AT&T’s monopoly and antitrust protection, believed that innovation and competitiveness were closely linked. A view that many of us likely share.

As for Bell Lab employees, some went to the Baby Bells while others stayed at AT&T. While Bell Labs remained a respected research organization, its mission changed in scope and degree of boldness from the pre-divestiture era. What followed were new competitors with fresh ideas that accelerated the rate of innovation far more than AT&T could have done on its own.

One cannot help thinking about this new era of rapid innovation. What led to AT&T’s breakup in 1984 is relevant to how three technology giants (“Tech Giants”) dominate the market today: Facebook, Amazon, and Google.

Just like when AT&T overshadowed the telecom industry for much of the 20th century, these Tech Giants have exploded in size and power over a relatively short timeframe. So much that rival competitors routinely get acquired to eliminate threats and gain intellectual property. So much that proprietary trade secrets, patents, and costly patent challenges make it almost impossible for other companies to compete. So much that these Tech Giants have restricted competition far more than when AT&T made 8,600 of its U.S. patents available to other companies royalty-free in 1956.

Some industry observers believe that these Tech Giants have amassed too much power over our economy, our society, and our democracy. Facebook influences over 2.5 billion global users with all kinds of views, including fake news. More than 70 percent of all Internet referral traffic goes through sites owned or operated by Google or Facebook. Amazon dominates much of the e-commerce market in North America and continues to expand its reach. While this is a capitalistic success story that created many jobs and stockholder equity, a similar analogy applies to AT&T when it too dominated industry with its might. Let’s not forget that innovation and competitiveness are closely linked.

We need to ask ourselves, have we created an oligopoly comparable to AT&T’s monopoly in the 20th century? Is it time for the U.S. Justice Department to investigate antitrust concerns as it did with AT&T last century? Same question for the European Commission on Competition. How big is too big when it comes to market dominance and political influence as AT&T once had in the 20th century?

It will undoubtedly take time and new national leadership to address these questions. In the meantime, one cannot help but marvel at the impact Bell Labs had on society by what was accomplished. These were amazing innovations that profoundly changed our lives. And a spellbinding history of the most influential corporate research lab the world has seen. Yet, a golden age that ultimately ran its course.
In closing, Jon Gertner’s book “The Idea Factory” is a must-read for those interested in innovation. Indeed, it was a long road from Alexander Graham Bell’s first working telephone in 1876 to where we are today with mobile devices more powerful than supercomputers were ten years ago. And much of the credit goes to the early pioneers from AT&T’s Bell Labs. With a nod to those Young Turks, we are reminded of what they likely did to solve the impossible: “Great innovation is alchemy — you take bits of curiosity, mix in some perspiration, and add a dash of inspiration in order to create remarkable work”—anonymous.

  • Attribution:


Dr. Robert Bornhofen
Dr. Robert Bornhofen
Dr. Robert Bornhofen is a scholar-practitioner with over 25 years of experience. As a scholar, he currently teaches strategy at Cornell University and the University of Maryland Global Campus. As a practitioner, his corporate career includes a variety of leadership roles at Fortune 500 companies IBM, Delta Air Lines, & Citibank. Dr. Bornhofen earned his Doctorate degree at the University of Maryland, a Master of Science degree from Colorado State University, and a Bachelor of Science degree from the University of Minnesota. As a conference speaker, Dr. Bornhofen presents at various industry forums. His current focus is on innovation within the water utility sector. As a researcher and author, Dr. Bornhofen published over 20 papers on topics related to innovation strategy. Passionate about change, Dr. Bornhofen embraces the creative spirit that goes into problem-solving, where smart people come together to transform great ideas into extraordinary outcomes. His articles reflect this passion and desire for continuous learning.

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