@adlrocha - PARPA (Private-DARPA)

Building better organizations for disruptive innovation

I accidentally came across this piece at the beginning of the week. I had another topic planned for this week, but the content of the piece was too powerful and full of ideas to miss the chance to write about it, and share these ideas with you now that they are fresh. Basically, the article explores how to build an organization that systematically enables “more science fiction to become reality”. Just like organizations such as DARPA and Bell Labs did decades ago with the development of the Internet, semiconductors, mobile communications, solar cells, and a long list of new discoveries that changed the world as we knew it. 

Instead of doing “yet another write-up” about the piece, I am going to do what I’ve done before with other publications: I will share my raw notes and reflections on the piece as a reminder for my “future me”, hoping that you also get some value from reading them. (BTW, if you feel extremely lazy and you don’t want to even read this publication, but you want to know what PARPA is all about, you can read this two-pager the author made available sunmmarizing the core ideas).

What is the current landscape of the innovation ecosystem?

“Different institutions enable certain sets of activities that we associate with innovation: Academia is good at generating novel ideas; startups are great at pushing high-potential products into new markets; and corporate R&D improves existing product lines. Together, these institutions comprise an ‘innovation ecosystem’".

Each of these structures have strengths and constraints that makes them great at what they do, but not more. Academics are good are generating ideas, but they only have resources to focus on narrow fields and open problems; startups can push an idea to the market blazing fast, but also have limited resources, and need to focus on short-term profitability in the process in order to survive; corporate R&D units have deeper pockets, and can attract multidisciplinary talent, but they will only focus on research endeavors related to their products, or that can represent an alternative source of income for their company. Generally speaking, big corporations are quite risk averse.

All of them are valuable for the innovation pipeline, but there is a gap that needs to be filled to have a complete innovation pipeline in this ecosystem able to transform science fiction and theory into reality. What allowed golden-age research orgs to produce such transformative technology?

Most significantly, these [type of] organizations simultaneously:

  • Promoted work on general purpose technologies before they became specialized.

  • Enabled "targeted piddling around," especially with equipment and resources that would not otherwise be available.

  • Fostered collaborations among diverse individuals with useful specialized knowledge.

  • Shepherded smooth transitions of technologies between different readiness levels, combining manufacturing with research to create novelty and scale.

And this is where PARPA-like organizations can operate sustainably and support the innovation pipeline. 

Innovation with structure, a system, and a roadmap

The goal of a PARPA-like company is to transform science-fiction, and theory into reality. This means moving from ideas, to prototypes, and to products that people can use. These ideas and prototypes may require expertise and research from multiple disciplines, and the final realization of some of these project may end up being that the idea is not feasible. This is why projects and research programs of a PARPA-like company need to be smoothly de-risked through the pipeline to make an efficient use of resources and researcher’s time. Research in hard problems can be slow, so PARPA-like companies need to focus on building a foundation that enables them to be sustainable for decades (what would have happened to Bell Labs if they didn’t have the funding to survive more than a decade?). This is achieved systematizing the innovation/research process within the org:

1. Create and stress-test unintuitive research programs in a systematic (and therefore repeatable) way.

2. Use that credibility to run a handful of research programs and produce results that wouldn't happen otherwise.

3. Use that credibility to run more research programs and help them "graduate" to effective next steps.

4. Make the entire cycle eventually-autocatylizing by plowing windfalls into an endowment.

We can even come up with a clear structure and a set of detailed fine-grained steps to achieve this. Even more, my personal feeling is that structuring a project with a system like this would no only be useful for PARPA-like companies focused on innovation, but for more traditional organizations approaching projects with a certain level of uncertainty (with its obvious differences).  Forget about Scrum and embrace the PARPA-like project management approach 🤓) 

  1. It's possible to design programs in a systematic (and therefore repeatable) way .

    1. It's possible to find people who want to do pieces of work that would not happen otherwise.

    2. There exist several areas that could possibly yield results (defined loosely) in 3–5 years (given steady work).

    3. For each potential program, it's possible to come up with a set of small experiments that could further confirm or deny its feasibility within 12–24 months and ~$1M scale.

    4. It's possible to get people to undertake seedling experiments.

    5. Accomplishing 1a→1d will involve a combination of one-on-one conversations driven by reading papers, finding gaps, reaching out to people, and holding small, intensive workshops.

    6. It's possible to find people who are excited to be PMs and actually do 1a→1e.

    7. It's possible to systematize this process.

  2. It's possible to execute on these programs in a way that relaxes academic/startup constraints.

    1. It will be possible to coordinate several research projects toward a coherent goal.

    2. The early pieces of work will be done by some combination of academic labs, contract R&D orgs, independent researchers, and possibly people within corporate R&D who are able to do work for grants.

    3. People will be willing to shift their organizational affiliations to an exploratory program organization as the program goes on.

  3. It's possible to "graduate" these programs in a way that gives them a life of their own.

    1. During the programs themselves, it will be possible to do some of the pre-work to figure out the best way to graduate technology in order to maximize its beneficial impact on the world.

    2. At least some of the people who have been working on the program will want to carry it forward in some form.

    3. Some of the technology will make sense as a company, some of it will make sense as a nonprofit, some of it will make sense as a licensed technology, and some of it will make sense as open-source.

  4. It's possible for this entire cycle to eventually become autocatalytic.

    1. An early (non-monetary) component of autocatalysis is a community that generates good inbound programs.

    2. 'Pseudo-autocatalysis" is a state where the organization is getting enough consistent revenue through some combination of donations, spin-offs, and other sources, like licensing and consulting, that it can continue to run multiple programs assuming those revenue sources continue.

    3. Full autocatalysis can only happen by building up an endowment.

And how to do all of this without worrying about money?

Research for the sake of research is not profitable. I always say that “a bad result is a great result, because it lets others know a path that is not worth following”. Unfortunately, bad results won’t fund your research, and the reason why many great researchers end up leaving research is because they get extremely burnt out of having to not only worry about their research, but also finding the funding to keep it alive. The goal of PARPA-like companies should be to build programs where researchers can safely focus on the research without having to worry about making ends meet. But the money has to come from somewhere, also for PARPA-like companies. Money does not fall from the sky, even if central banks insist on making us believe it does. So how can this kind of research organization fund themselves efficiently (and effectively) to be sustainable for several decades while building general-purpose science fiction?

“The nature of PARPA’s work means that while it will (hopefully!) create a lot of value, it likely won’t be able to capture enough of that value to be net profitable and absolutely would not be able to compete with startups and the stock market on a time-adjusted ROI basis. However, commercialization and startups are powerful dispersion mechanisms for certain technologies. If PARPA does its job right, it could shepherd industry-defining technologies in the same way that PARC or Bell Labs did in the past. It’s a reasonable bet that a portfolio of programs that become companies would have an investable return. A purely Nonprofit organization funded by donations would leave support for these programs on the table. To that end, PARPA will use a hybrid for-and-non-profit structure. The non-profit will run the programs and ’drive’ to make sure that we work on programs based on potential impact, not profit.”

I’ve been thinking a lot about the incentive systems of research and innovation and ways to improve it. I once came up with an organization structure similar to the one presented in the article to fund research so that researchers can keep doing research without having to worry about becoming engineers, or even sales representatives, of their project if it ends up being a success. Don’t look at me like that, this has happened before in R&D corporate units, and I’ve experienced it personally.

Roughly, how I feel the funding stages of an organization like this could look like is:

  • At stage 0, there needs to be some kind of initial seed money in the form of a grant, a donation, or an initial investment in the company (risk capital) to fund the first few research projects/programs. It helps if the company has a good first idea of something that could generate short-term value to attract future money.

  • From there on, additional projects would have to be funded with:

    • Program-specific investments from organizations and individuals interested in the research and development of certain fields.

    • General donations and research grants.

  • When the results from these initial projects start being a reality because they’ve been sufficiently de-risked, and the general-purpose technology can start being realized into actual projects, a spin-off company is created to generate value from the results of the research project. The parent company takes equity on the spin-off, and uses the generated value from this company to fund future programs and research. At this point, the parent company can welcome new investors, or liquidate their stake according to its financial health, or how much it wants to boost research according to its active research programs, or the one in the pipeline.

  • After this initial stage, the company can go two ways: the spin-off process of the initial programs is a success and it can start planning for its decade-long sustainability replicating the aforementioned process; or the results of the initial spin-offs are not as successful as expected and the company needs to return to stage 0, find external investment and bet on a small number of new research projects to generate the added value required to recover its financial health. 

  • Additionally, many research groups and R&D departments will be willing to work with the parent company. Collaboration is key for innovation. These companies will also behave as innovation hubs where researchers and companies gather to work on the hard problems of a field. PARPA-like companies would benefit from investing part of their funds to become patrons of great researchers and teams to improve research in a field (see below).

This was a toy-example of how I imagine the funding of this type of companies to go. The article goes in “way more detail”, and it is a must read to understand the economics of research and innovation.

Industrial labs enabled high-collaboration research work among larger and more diverse groups of people than in academia or startups.

The team, collaboration, and researching in the open

In addition to giving projects longer time scales, less existential risk, and larger budgets than most startups, there are several specific ways that industrial labs helped technologies find good niches that startups and academia don't provide.

When you're still trying to figure a technology out, it's not clear which skill sets you want in the room. Industrial labs facilitated people floating between different projects loosely creating and breaking collaborations. Bell Labs was particularly good at enabling these free radicals:

"The Solar cell just sort of happened," he [Cal Fuller] said. It was not "team research" in the traditional sense, but it was made possible "because the Labs policy did not require us to get the permission of our bosses to cooperate—at the Laboratories one could go directly to the person who could help."

If I got you hooked this far, you definitely need to read “The Idea Factory”. Is a must if you are a researcher looking to work or building a company as the one that allowed Shannon to give birth to Information Theory, or to Shockley et. al. to design their transistor. 

I can reiterate enough the importance of collaboration on innovation. Being exposed to a constant flow of ideas boosts researchers creativity (again, I highly recommend reading the Idea Factory, and understanding the power of hallway walks). For PARPA-like orgs to be successful on their research endeavors, they should dedicate part of their resources to promote this. This can be promoted by:

  • Giving grants to top-researchers to figure out the blind spots of missing pieces of a problem in order to de-risk certain programs.  

  • Promote open research. The goal is to transform theory into reality, and the flow of open ideas and collaboration can take theory into reality faster. These companies are building general-purpose technologies that will lead to specific technologies that conform to new products and technologies, so promoting open research doesn’t put their stake in the result. If the result of the research is something like the Internet, the amount of new products that can be built enables everyone to get a piece of the pie. The aim of the research in PARPA-like companies is not to capitalize a piece of the pie with their technology (as it generally happens in large corporation R&D), but to make the pie substantially larger for everyone.

  • Finally, sharing common roadmaps with other research groups and organizations can certainly help parallel streams of research with a common goal. PARPA-like orgs can become the thought leaders orchestrating these efforts between different entities.

A must read

This was a collection of ideas and reflections triggered after reading this piece. I’ve chosen these ones, either because I’ve been reflecting on them before, or because they have really resonated with me. In any case, if you are into innovation and building a company that can sustainably focus on doing research, you should definitely read this article.

One final thought. While writing the article I was trying to come up with existing companies that fit the description of a PARPA-like org. I could only come up with one. What about you? Can you think of existing companies that approach innovation in a similar way as the one described above? If you can please ping me, I would love to learn more about them and how they operate internally.