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September 15, 2008

ROI

Beyond simple counting, number fumbling is a human constant. Wall Street floats on an ocean of dumb money. And bean counters, the pros that run the banks... Well, let's just observe that the deepest and longest lasting recessions/depressions in this country have been lit by what is quaintly referred to as a "bank panic." We're in the middle of one right now. So, in that spirit of "lost in figures," Maureen Farrell at Forbes spotlights "Universities That Turn Research Into Revenue."

Farrell made the number novice mistake of correlating current year expenditure with current year revenue for "research-related" endeavor. In her survey, New York University yielded a 75% return on investment (ROI) in 2006 for spending $210 million on research, but getting $157 million in income related to research. Blah, blah, blah, down to line with other universities.

The omission of statistical sense is in the correlation on a current year-to-year basis. Patents take three to five years to get, and then most take at least a few more years to turn into a cash cow. If Stanford University was sucked off planet earth tomorrow, it would be making patent money for over a decade to come, while its research expenditures were zip.

How to account for such indeterminate lag? The best way would be to resolve the indeterminacy. Conduct a study of mean-time duration from research outlay to revenue on a patent basis. Even a relatively small sample size would give a ballpark estimate, which is probably, as a guess, between seven to ten years. Otherwise, aggregation muddies the stats, but accounts for lag somewhat. In other words, take numbers by the decade, not year-by-year.

Benjamin Disraeli and Mark Twain stay busy spinning in their graves over articles like this.

Hat tip of thanks to Peter Zura, who ate up the report: "Forbes has a great article on IP cash cows..."


For those interested in what's going on in the U.S. economy, expect continued turkey-jerky through 2009, with glimmers of recovery beginning in 2010. The unwind is unkind, and this one is a doozy. Thanks to serial bubble-blower Alan Greenspan and his hapless successor, Ben Bernanke, for this one, with a heavy helping hand from Dubya, who did everything he could to blow the confidence game that runs the economy.

Posted by Patent Hawk at September 15, 2008 10:31 AM | Patents In Business

Comments

The bailout of the crooked banks seems like a "get out of jail free" for BigCorp similar to the proposed "get out of jail free" Patent "Reform" peddled by the CPF.
Their whole argument is that big-time crooks should be punished less than small-time crooks - this is the basis of Merc Exchange vs. ebay.

Posted by: anonymous at September 19, 2008 6:20 AM