Week of 29 Oct 07

In the United States, Europe, Japan, Australia, New Zealand, and a few other places, we, the pulp and paper industry, have moved towards a model that funds research through primarily government-backed programs. We have come to this point through external pressures, false ideas and laziness. This model, although it should not necessarily go away, is not serving us as well as others could.

The external pressures come from stockholders and their proxies, stock analysts. This group demands accountability from our corporations (a good thing) but has no way of measuring anything but short term (read: the next 13 weeks’) results. Hence, funding research, whose results are more likely to be measured in 13 years than 13 weeks, was largely cut from the budgets. Unfortunately, an industry, whether an individual company or a consortium of companies, that does not do research is planning for no future.

Some do believe in a future, so they have looked around and said, “Aha! We’ll get the government to fund our research. It is a way to recoup not only our tax dollars but some from others—we’ll get free research! Aren’t we smart?”

These ideas can be ripped to shreds in a heartbeat. First, the pool of tax money obeys the law of conservation of matter, or, stated another way, it is a zero sum game. There are only two sources of tax money: (1) tax revenues and (2) our grandchildren (borrowing against the future). When you are at the top of the tax heap, as virtually every corporation is, you are not getting anyone else’s tax money, you are just getting a portion of your own back. If you are further down the food chain, so to speak, it is different—you can pick up other’s tax money for your constituents. In fact there is a very senior senator from a mountainous eastern state here in the United States that has made a career of that. He brags that his state receives more from the Federal Government than it pays in in taxes—he is correct and his constituents apparently believe him for they have named virtually everything in his hometown (Beckley, West Virginia) that doesn’t move after him.

Tax money for research comes with many strings and hidden costs. Using the US as an example, I’ll point these out. First, we must lobby Congress to get it. Second, even with lobbying, it only comes through channels and for purposes defined by Congress, necessarily a political process that has little to do with succeeding in business. Third, it comes with a handling fee, for there are bureaucrats that must be paid salaries in order to determine who actually gets the allocations approved by Congress. Fourth, steps one through three take an inordinately long time. And, finally, there is loss of control: just like everywhere else, those who write the checks say what gets done by when.

However, these steps are not the most insidious part. In the modern system it appears we have turned many researchers into funding lap dogs. It was not always this way. Coincidently, this month we are noting the launch of Sputnik fifty years ago in October 1957. I remember my dad reading about this in the newspaper, figuring out when it would come over our town, and dragging us out in the back yard to see it. Sputnik awakened the United States to the space race, resulting in the formation of NASA (National Aeronautics and Space Administration), and with the election of President Kennedy, a definite goal: to get to the moon by the end of 1969. The only way to do that was with government funding and, as we all know, the goal was reached, with the loss of only three lives—a remarkable safety record for such an audacious plan. NASA has floundered aimlessly ever since.

In many government funded research areas today, at least from my perspective, we have forced our researchers to kowtow and bend their innovative thoughts to fit some convenient funding scheme. In some cases, they have lost their integrity completely. I gave you an example of how that is done in this column last week, entitled “Global Shrinking.” On one level, you were probably thinking I was poking fun at Mr. Gore, and I was just a little. But on a serious level, I was illustrating what a researcher that has lost their integrity may do or one that spends an inordinate amount of time filling out government funding applications may be forced to do (a researcher’s time is a zero sum game, too). Some of you wrote commenting that I must have spent a great deal of time on that piece of drivel. I designed it to make it look that way—if I spent more than two hours on it, I’ll eat my hat. Even the details about Einstein going to Japan and quoting exactly from page 310 in that biography was easy—that just happened to be where I was in the book—I spent no time researching it. The style, acknowledgement of research help (Fred is my dog), a bibliography and so forth, also made it look “researched” even if it was obviously a parody.

Unfortunately, I fear, we are in danger of getting what appears to be real research done about this sloppily. Material that has format but no substance. We are not necessarily protected by peer review, either. My personal experience in that endeavor is telling. I was asked to be on a peer review committee. I was vetted by an untrained administrative assistant. After three or four papers, I resigned, for I felt I was in over my head. The sobering thing is that I had to resign out of my own convictions; had I not done so I would probably still be on it today.

So, what must we do? First, we must recognize that good research is the path to the future. Second, we have to recognize that government funding, while appropriate in some cases (energy is probably one of them) is not a “one size fits all” answer to our research needs. Third, we have to stop being lazy and educate stockholders and analysts, showing them that it is in their best interests that we fund more research directly (and point out that it is subsidized by the government as a tax deduction). Fourth, we must responsibly place the funds with appropriate organizations. Fifth, we have to manage the research, which we get to do if we write the checks. And finally, we must get outsized, practical results for our stockholders for our investment. It is not easy, but it is a better path.

You would not think of cutting off funds for safety training and safety devices. Make sure safety is at the top of your funding list.

Be safe and we will talk next week.