About a month ago, I wrote a couple of essays on the Brookings report “University Start-ups: Critical for Improving Technology Transfer.” The Brookings report thinks that university administrators starting and investing in companies is a really keen idea, especially if governments throw money in where private investors have no interest. It is possible, however, that even a horribly flawed argument can end up with recommendations that have some value. Let’s see if that’s the case here. In this addendum, I look at a sentence in the Brookings Report that I can support:
These technology transfer offices (TTOs) are costly to the university.
University TTOs are often expensive to operate. Those asking for budget often used the term “investment”–as if the university has money to put at risk, in the hope of making bigger returns. One might also use the terms such as “speculate” or “gamble” or “throw darts” or “flush money down the toilet” or “offer a libation to Moloch.” Somehow, the euphemistic “investment” is preferred. Despite this problem of nomenclature, there remain good reasons to fund university IP offices–just not the money-seeking ones that are presently current. One wonders–I wonder, at least–does a rotten, silly argument matter if it gets what is needed? One might reply–I would, at least–yes, it still matters, because a rationale sets up expectations about activity, about consequences, about the truth-capacity of those running the program.
Another problem that the above sentence from the Brooking report obscures is that sponsored research is costly to the university as well. University administrators routinely publish figures that are meant to lead the public to the idea that sponsored research is a “source of revenue”–meaning, operating at a profit over costs. The grim reality is that for all but the smallest university research operations, it costs a university more to spend a sponsor’s money than the university gets from the sponsor. That’s right. Add the direct and indirect costs, subtract the direct expenditures, the benefits, the losses due to contract failures, the administrative expenses, the waiver of indirect fees or failure to collect them, and a university spends $120m to use up $100m of extramural funding. When a university reports extramural grants topped $500m for a year, that means that the university has had to draw perhaps another $100m from somewhere else to cover for spending that $500m. Where does that other $100m come from? Not from sponsors. Not from donors. Not from the state, these days. Not from sales of T-shirts. Not from bonds. It appears that the primary source for covering the shortfall in research is money laundered through student tuition.
The race to have the most sponsored research money–because that apparently is a sign of “excellence” and used in “rankings” to position universities, so that the top-ranked universities can, um, raise tuition–drives the decision to under-charge sponsors for conducting research on their behalf and to over-charge other budgets for administrative research costs because, well, no-one apparently cares what gets tacked on as a research expense. Or, worse, folks adopt the convenient argument that research is important to instruction, so students should have to pay the shortfall, because research, not instruction, is what adds luster to their degrees. It’s another case of a misshapen argument covering for something for which there might be good reasons.
The simple re-expression of the Brookings sentence, then, is
These technology transfer offices are costly to the university‘s students.
That’s closer to the truth of it. The students are paying for the overages, and get nothing back for their investment. When a university makes a windfall in licensing, it does not put the money back into instruction, but rather into research buildings or research bridge funds or into administrative slush funds. No university I know of has ever reduced tuition for students in the program in which the invention was made.
I imagine that if licensing revenue, after costs, went to reducing tuition for the students in the program where the invention had been made, there might be a whole lot more interest in technology transfer among the students in that program. Maybe even some faculty not so motivated by personal wealth would respond. Maybe companies that otherwise would resist licensing would see it more favorably if they could claim it as a contribution to support students in a program that they might hire from–if you are going to license stuff arising in that program, and the faculty, staff, and students who led development are in that program, then perhaps the graduates of that program are sweet stuff. My argument is: fund instruction with licensing income to create industry interest in a particular program’s research outputs. Returning licensing income to students, in the form of lower tuition, not higher tuition, would indeed represent a “return” on investment. When a given program’s instructional operations are fully endowed by licensing income, then break out the slop buckets for the slush funds.