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Posted as a late, long comment in Devilstower’s front page diary today First National Brontosaurus on why big things (reptiles, mammals, companies) should fail in difficult times. Title of comment...

Buying the future: Amgen and Exxon

I have had projects with the biotechnology company Amgen for 10+ years. And when I was a graduate student I worked for them (via a temp agency) for a year. Through this- working with and for Amgen- I have seen the corporate culture, and how they do business, change dramatically. They are a far less efficient company now; unable to innovate. But they have the resources (size) to buy other’s innovation and profit tremendously from it.

Ten years ago, from my perspective, Amgen was a great company. They were fun to work for and work with. Employees were happy and well cared for. And employees, in turn, were very productive and creative; Both in their ability to develop new therapies, but also their ability to develop new techniques for efficiently synthesizing and screening targets. Good people and good science was the foundation for the company- and they were very successful.

This decade I have seen many barriers put in place that makes innovation and efficiency much more difficult. They are no longer fun to work with; And the layers of lawyers and HR are 3x as thick, when I do decide to work with them. But, more broadly important, they no longer develop drugs in house. They have made the decision, like most pharmaceutical companies, to reduce applied research. They buy and develop targets from small, innovative, efficient companies.

Their 2007 sales were 6.7 times greater than their 1997 sales ($14.7 Billion compared to $2.2 Billion). However, by any metric of innovation, creation, efficiency- they are capable of doing far less Now than they were ten years ago.  (disclaimer- this is my opinion)  They are, however, much more able to buy others’ innovation.

And this brings me to Exxon. Exxon is innovating nothing (not innovating anything?). They are using 100 year old technology to pull oil out of the ground. Yes, the methods have improved, and they can go far deeper- but they are still pulling oil out of the ground.

Exxon’s profits are insane (nearly $15 Billion 3Q 2008)- but very little is going into R&D.What they are doing is buying their own stock. They are ensuring survival and dominance.

Despite the absence of investment- they will OWN energy for the next century. Why? Because they have the resources to buy innovation when they know it will be profitable. Exactly what Amgen and other big pharmaceuticals companies do. The innovators will be bought out, and they will benefit from the purchase. But the risk/reward is weighted heavily towards big companies who can buy when the risk has been removed.

Big cannot innovate. Big is not efficient. Big makes for a shitty place to work. Big stifles the future of this country. Big is un-democratic. Big is less capitalistic. (yes, these are generalities)

But big wins in this country. And will continue to win without big change. The US will not be successful in the World’s marketplace with this system.

God bless the USA. And God help us. Yes We Can!!

Originally posted to flymice on Sun Nov 02, 2008 at 07:07 PM PST.

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Comment Preferences

  •  And what is happening in the auto... (1+ / 0-)
    Recommended by:
    kyril

    ...industry? They want to merge GM and Chrysler. It would sound like a joke from Keats The Insolent Chariots if it wasn't true.

    Float like a manhole cover, sting like a sash weight. John McCain = Old Boat Anchor

    by JeffW on Sun Nov 02, 2008 at 07:17:33 PM PST

  •  Financial capitalists buying out the (1+ / 0-)
    Recommended by:
    JeffW

    company capitalists.

    -- We are just regular people informed on issues

    by mike101 on Sun Nov 02, 2008 at 07:26:02 PM PST

  •  Buying the future? Isn't that also the story of (0+ / 0-)

    Sand Hill Road?

    As God is my witness, I thought turkeys could fly.

    by ticket punch on Sun Nov 02, 2008 at 07:37:56 PM PST

  •  It's All Part of the Long Drive to Shift th Whole (2+ / 0-)
    Recommended by:
    JeffW, Cassandra Waites

    economy to finance.

    Shift the competition from goods and services to a competition for markets themselves.

    We need to reinstate the New Deal to restore the protections against excesses of industrialism that the framers could never conceive.

    But for New Deal II we need a new conception to defend the people and the economy against information age excesses such as the ability to know and manipulate the individual's and the peoples' minds before they yet know them themselves.

    We'll be lucky to get half the New Deal back though. No way are we in position to address our present age.

    We are called to speak for the weak, for the voiceless, for victims of our nation and for those it calls enemy.... --ML King "Beyond Vietnam"

    by Gooserock on Sun Nov 02, 2008 at 07:38:20 PM PST

  •  Great diary! A little raw but big on insight. n/t (0+ / 0-)

    Isn't it a good feeling when you see the paper in the morning, it says 'Axe Slayer Kills 19' and you say, "They can't pin that one on me!" - Jean Shepherd

    by razajac on Sun Nov 02, 2008 at 07:52:37 PM PST

  •  Hey, Exxon-Mobil used to run a big R&D site (0+ / 0-)

    here in New Jersey until not too long ago. They were working on producing solid catalysts that could be used in temperate conditions (relatively low temp. and pressure) in the industrial synthesis of phenols, peroxides, and other useful commodity chemicals.

    The thing is, previous methods of synthesis of, let's say, phenol, produce large amounts of byproducts, like acetone, which you have to dispose of - preferably by selling, but if the demand for acetone isn't proportional to the demand for phenol in roughly the same proportion that the reaction produces phenol and acetone, you'll have to either lose potential revenue by not having product to sell, or you'll lose money on finding a safe way to dump your waste rather than selling it to someone who can use it. So this new solid-catalyst method was supposed to not only reduce production of byproducts, allowing makers of phenol to concentrate only on meeting the demand for phenol, but also be more efficient in terms of energy demand and lower maintenance requirements, due to a simpler apparatus.

    'Course, then again, they did used to run that hot and sexy R&D site, until they closed it.

    The thing is, R&D does usually pay off in the long run, but in the short run it costs, and in the short run, your competitors may be selling off their futures for a quick buck now and if you don't join in, your company won't last long enough to reach its golden long-term future. So a company can only sustain a large R&D program if:

    1. It is so massively profitable that the R&D budget would hardly make a dent, or
    1. The board and CEO are focused on long-term value rather than short-term growth, and can survive the short-term lack of investment from people who want to see growth now and to hell with later.

    John McCain: Senator, former POW, confusing the USA with Cadia since 2006.

    by Shaviv on Sun Nov 02, 2008 at 07:57:34 PM PST

  •  Money Freezes Things in Place (0+ / 0-)

    The great lesson I drew from the dotcom boom was that money freezes things in place.  At the beginning of the dotcom excitement, there was a feeling of accelerating innovation and experimentation.  I remember the wearable computers folk walking around MIT and the bubbling of ideas in the new Internet cafes.  Then the money boys came around and everything froze in place.

    My observation is that when money comes into the picture, the investment has to be amortized and that makes innovation slow to a crawl.  If you buy the technology for big bucks, you want to get your money back on that technology before you release the next new thing on the market.  

    Of course, sometimes money buys innovation to protect old investment as well, again slowing things down.

    Those are my observations but I am most definitely not a businessperson or economist so I could very well be wrong.

    Solar is civil defense. Video of my small scale solar experiments at http://solarray.blogspot.com/2006/03/solar-video.html

    by gmoke on Sun Nov 02, 2008 at 07:59:50 PM PST

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