How to unleash $2B per year of productivity in the USA by slashing some bureaucracy

How we can cut $2B in excess bureaucratic costs in the USA by cutting some unused regulations.

Here, I will outline how we could save approximately $2B per year in the US economy though a simple law change and regulation reduction that, to my understanding, would have no downside. In summary, remove the remaining legacy bureaucracy associated with the Bayh-Dole Act and unleash the free market to innovate instead of fill in paperwork.

My hesitations about sharing this

I have some major hesitations (see my last blog post) about what is happening in the current political climate. However, I believe that there is a unique opportunity in history to actually cut some excess regulations. Furthermore, I believe I have a unique perspective to lend given my experience in industry and academia and dealing with patents and NIH grants. So here we go.

The Peer-review process

First of all, I believe strongly in the benefits of the peer-review process to the growth of the US economy. In the USA grant award system, applicants must compete and only the strongest applications are funded. I have failed many more times than I have succeeded in applying for grants. I want to emphasize that I believe that this peer-review grant process is the engine of the US economy. So we absolutely do not want to lose that, it is an essential engine of progress. So what I am talking about here is minor tweaks to a very good system! Not scrapping the whole thing! Let's be SUPER clear about that!!!

To those of you that have applied, you know that it can feel like a gauntlet. Here is a pictorial representation that ChatGPT and I came up with to convey the feeling of applying for a grant:

If you make it through all the peer-reviewers trying to poke holes in your application, then you get to the promised land of a funded application!

My experience with NIH SBIR grants and inventions

My company Milo Sensors received a $223k Phase I SBIR award and a $2.2M Phase II SBIR grant from the US Government. I have also been a reviewer in more than four SBIR panels. I also am author on multiple patents, some of which were a result of inventions obtained using federal funding, and therefore fell under the Bayh-Dole Act. So I have seen the system from the perspective of a small business owner and inventor and also from the perspective of an independent reviewer evaluating other applications. Overall, all the reviewers I have met have been extremely professional and have prioritized good science and technology over anything else. The Program Officers and NIH employees that I have dealt with have similarly been professional and prioritized the best science without any discernable signs of major bias. So the system overall is working at funding good research and early-stage technology development. What I want to do is make it more efficient.

The Bayh-Dole Act

In 1980, the US Congress passed the Bayh-Dole Act (PL 96-517, Patent and Trademark Act Amendments of 1980). Before this, inventions that arose out of federal government grants were owned by the federal government. The US Government was sitting on around 30,000 patents. As you can imagine, the government was not very efficient at commercializing these inventions as compared to the free market. The Bayh-Dole Act changed the law and allowed private companies to own patents that arose from federal government funding. The results have been widely lauded as leading to large-scale innovation within the private sector, leading to life-saving therapies and quality of life improving technologies. So overall, the combination of federally funded research together with private innovation has been a huge benefit to society. It all sounds great, right? Except, the Bayh-Dole Act left some bureaucratic claws in the private industry that are still holding things back.

The remaining claws

At the time the The Bayh-Dole Act was passed, it must have been somewhat scary to relinquish control of patents away from the government and turn it over to the free market. Some of the concerns included "what if a company uses federal funds to invent a new drug that cures a major disease, and then charges too much money for it?" A fear of price-gauging for life-saving medicine is a reasonable fear. However, it is also worth considering that this would only apply to drugs that did not exist previously and would only exist for the lifetime of a patent (around 20 years). This reminds me of a brilliant bit:
https://www.youtube.com/watch?v=D_Txjv30XDU&t=7s

"how quickly the world owes him something he knew existed only ten seconds ago." Louis CK 

In any case, I believe that it is understandable that some claws remained in the original 1980 Bayh-Dole Act. Those claws included "march-in rights" which enable the federal government to get a royalty-free license to use the technology. The idea was that this could enable some protection against price-gouging. However, we now have 45 years of data since it was originally passed that we can examine, to examine the cases where the government exercised the march-in-rights.

Surprise: it has never happened!

In the 45 years since the Bayh-Dole Act was passed, the government has exercised march-in-rights exactly ZERO TIMES. Zilch, nada, goose-egg. So every year, thousands of federally funded researchers fill in millions of pages of paperwork... all... for no actual benefit. As a scientist, I believe in examining the experimental evidence. Here, we have 45 years of data, and I was shocked to learn that march-in-rights have been exercised zero times. With billions of dollars of federal funding annually and thousands of patents, a zero is a very strong scientific data point!

Consequences of the Bayh-Dole Act

So what's the big deal with march-in-rights? It's not a terrible thing right? It protects people? Well, this is a fallacious argument, because it ignores the real costs that adding bureaucracy adds to the development of technology. As a small business owner and inventor, I had to interact directly with the iEdison website (Bayh-Dole compliance portal) and associated laws. It was a disaster. It was a major drain on my resources. I estimate that I spent approximately one month of my time dealing with: communicating march-in-rights to investors who were scared about it, filling in iEdison paperwork and managing the weekly (yes, weekly) emails I got from iEdison warning me about some new red flag in their system (e.g. a patent reporting deadline or whatever), adding statements to patent filing, making sure it all was squared away, etc, etc. It was actually a pretty big headache. In fact, the reason I wrote this article was through thinking deeply about where I saw opportunity to reduce government waste based on my unique experience. That is one month of my life that I wasted. I could have been doing other more productive things like developing technology instead of doing this busy-work. If you can't tell, I hate busy-work.

I am not the only person that has to deal with this headache. Every recipient of federal research dollars has to do it. That includes: SBIR grants (small businesses), Universities, and other research institutes. If you add up 1 month of wasted time per grant, it becomes quite a large number. I estimate around $2B/year in lost costs.

At Universities, there are Bayh-Dole compliance experts, that could probably be using their brains to do other more important work such as developing and licensing patents. At companies, the same thing. The resources allocated to compliance are a drain on operating costs. Within the federal government itself, there are real costs associated with Bayh-Dole compliance. There are probably dozens of people who spend their time dealing with Bayh-Dole compliance that could be doing better things with their time. There are direct software development and server hosting costs associated as well, for example the iEdison portal.

My suggestions

Given that Bayh-Dole Act march-in-rights cost resources to comply with, and given that the march-in-rights have been exercised zero times in 45 years, I think it is time to rewrite the law.

I suggest that we enable small businesses and universities, and research organizations, and all recipients of federal funds, to have full rights to patents and inventions that they develop, and that we eliminate the Bayh-Dole-Act march-in-rights. You could call this a "free and clear" system.

I suggest that we eliminate the iEdison program - let the free market own IP without burdensome paperwork and disclosure requirements. Therefore, in my opinion the entire Bayh-Dole act and iEdison program is useless and could be cut without any harm to the US government. 

Remaining march-in-rights

If Bayh-Dole march-in-rights are eliminated, as I suggest, then the Federal Government would still retain some march-in-rights. Under 28 U.S.C. § 1498, the U.S. government can use or authorize others to use a patented invention without the patent holder’s consent, as long as the patent owner is compensated with "reasonable and entire compensation" through a lawsuit in the Court of Federal Claims. This law is often used for military technologies and public health needs but does not grant the government ownership—only the right to use the patent. Separately, the Defense Production Act (DPA) allows the government to compel companies to prioritize federal contracts or expand production of critical technologies during emergencies, such as wartime or public health crises. So there are still some claws remaining against price-gouging or national security.

Conclusion

To improve the efficiency of federal grant funding process, the following actions should be taken: iEdison, the Bayh-Dole Act, and associated laws, should be replaced with a "free and clear" system whereby grant awardees are free and clear to develop IP as they see fit. I estimate that this would save tens of millions of dollars of federal funds and $2B/year in increased productivity among awardees, including universities and small businesses and free up innovators to innovate rather than fill in paperwork.

The evils of the current administration

Some recent political events have elevated my level of concern for the future of the US and the western democracies of the world to the point where I feel a need to do something, starting with... writing a blog! That'll show 'em! 

Unacceptable #1: Dehumanizing immigrants

A recent video of an immigrant being chained and deported, labelled as ASMR (autonomous sensory meridian response (ASMR) is a tingling sensation that usually begins on the scalp and moves down the back of the neck and upper spine), was reposted by the White House:

https://www.msnbc.com/top-stories/latest/trump-white-house-mocks-immigrants-deported-asmr-x-elon-musk-rcna192820

This is dehumanizing.

It is OK to have laws and require individuals to comply with laws. However, it is not OK to revel in the suffering of other people. To take pleasure in the suffering of others is psychopathic. I refuse to believe that the United States is a land of psychopaths. I think, like any country, there are a few, but it cannot be the official position of the government that being a psychopath is acceptable or even encouraged. Where this leads is not good: a society where empathy for others is totally lost and extreme cruelty to others is performed and celebrated. Disgusting.

Therefore, for the government to label deportation videos as ASMR is not acceptable.

Unacceptable #2: Nazi salutes

The US fought the Nazis in WW2. luckily, the fight for freedom was successful.

Now, for some insane reason, we are seeing various leaders in the government doing Nazi salutes. Even Elon Musk got in on the action:

If you get excited and accidentally do a Nazi salute, I think the answer is "I'm sorry, that was not my intention. The holocaust was a global tragedy that led to the death of 6 million Jews, and I will try to control my body movements moving forward." The answer is not to gaslight people and tell them they are over-reacting. If you are repeatedly doing Nazi salutes, then you are a Nazi. There is no room for Nazis in the modern world. That's what WW2 was largely about. It is a settled issue. Nazi salutes require detailed explanations when they are met with outrage.

The fact that idiots like Steve Bannon still have any sway (e.g. at CPAC) is beyond my comprehension.

The combination of normalizing Nazi salutes and cruel behavior (see point 1) are not acceptable. 

Unacceptable #3: threatening to invade sovereign nations

It is understandable that Trump would like the USA to own Greenland and Canada. These countries will have growing coastlines and access to resources with climate change warming the planet. However, what is not acceptable is to threaten to invade them. To call the Prime Minister of Canada the Governor of the 51st state is an attack on the sovereignty of a nation. It is not acceptable.

Unacceptable #4: Claiming that Ukraine invaded Russia. 

The Russian invasion of Ukraine in 2022 was met with condemnation around the world, sanctions, and military aid. Not a strong enough reaction in my opinion (oil imports exempt?!?!), but a strong reaction nonetheless. But the recent "both sides" arguments used by Trump and the suggestion that Ukraine was somehow responsible or should have prevented this, are beyond comprehension. These words seek to wipe away the bitter lives lost fighting for democracy and against tyranny. We must honor the veterans in the fight for democracy against invasion and tyranny, and it is unacceptable to try to pretend that Ukraine was somehow responsible. Russia led an unprovoked invasion of Ukraine in 2022. End of story.

Why do I care?

I care because I live in the United States. To me, the USA provides opportunities and also stands for freedom and democracy over tyranny. The US stands for science and technology to advance quality of life and reduce suffering. However, my enthusiasm for the US is plummeting, largely due to the recent political events that undermine these values.

What should we do?

Step one is to unite with others to universally condemn the above actions.

The 50% Rule: How to Optimize Your Research Strategy

Which experiment should I do next?

In science, we constantly face this dilemma. Which experiment will advance my research the fastest?

Through my experiences and interactions with different researchers, I’ve noticed a pattern:

• Engineers prefer safe experiments—those they know will work.
• Scientists often pursue high-risk, high-reward experiments that frequently fail.

So, which approach is correct?

Neither! The optimal strategy for advancing an R&D project is to conduct experiments where each test has a 50% chance of falsifying the null hypothesis.

Let’s break this down with a simple analogy.

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A Needle in a Haystack

Imagine you’re searching for a needle in a haystack—a metaphor for making an important discovery.

• The haystack contains 1 billion pieces of straw.
• The only way to detect the needle is with a metal detector that beeps to indicate "yes" for a given scanned pile.
• You can perform one scan per day.

What’s the fastest way to find the needle? The metal detector is an analogy for a scientific experiment, and one scan per day is an analogy for the average time a single scientific experiment takes.

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Strategy 1: The Tedious One-by-One Approach

The most basic approach is to scan each piece of straw one at a time.

• On average, it would take:

$$\frac{1,000,000,000}{2}=500,000,000\text{ days}\approx \mathrm{1.4\; Million}\text{ years}$$

Clearly, this is not an efficient strategy.

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Strategy 2: The Engineer’s Approach

An engineer takes a systematic approach:

1. Scan the entire pile.
2. Remove 10% of the haystack and rescan.
3. Repeat until the needle is found.

The engineer likes this method because the majority of the time, the metal detector beeps, and everything is under control as they make progress.

In the first scan, the needle is always detected (100% probability). After removing 10% and rescanning:

• 90% chance the needle is still in the larger pile (with 900M pieces of straw).
• 10% chance the needle is in the removed pile (with 100M pieces of straw).

The expected pile size after the second scan is:

$$N=0.9(900M)+0.1(100M)=810M+10M=820M$$

We generalize this with the recurrence relation:

$$N_{n+1} = N_n(2P^2 - 2P + 1)$$

where $P$ is the probability of retaining the needle in each scan.

For P = 90%, we compute:

$$R = 2(0.9)^2 - 2(0.9) + 1 = 0.82$$

The number of scans needed:

$$R^i = \frac{1}{10^9}$$

Taking the logarithm:

$$i = \frac{-9}{\log(0.82)} \approx 104 \text{ scans}$$

Or, 105 scans if we also count that first calibration scan. In any case, the engineer finds the needle (makes the discovery) in a little over 3 months. Much faster than scanning one-by-one!

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Strategy 3: The Risk-Taking Undergraduate

An undergraduate student, encouraged by their advisor to try “crazy” experiments, has only a 15% chance of success per experiment.

For P = 15%, we get:

$$R = 2(0.15)^2 - 2(0.15) + 1 = 0.745$$

The number of scans needed:

$$i = \frac{-9}{\log(0.745)} \approx 70 \text{ scans}$$

So the undergraduate student is done in a little over 2 months. This is even more efficient than the engineer’s method!

At first, this seems counterintuitive. But in this case, failing more often actually speeds up progress because of the sporadic breakthroughs that make up for the many failed experiments.

The engineer is frustrated.

The analogy here could be that an undergraduate student is testing a new sample prepared in a way that has not been tested before, using an instrument that they have never used before, hoping to see an effect that has been described in the literature. It is unlikely to succeed, but if it does it will pay off big! Or so they think. By the way, this was me during my undergrad research! Actually, my P number was probably closer to 2% than the 15% used in this analogy since I did a lot of swinging for fences and not much hitting!

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Strategy 4: The Postdoc’s Eureka Moment

A postdoctoral scholar, having experimented with both conservative and risky approaches, asks:

What is the most efficient probability of success?

To find the optimal $\mathrm{P,\; she\; minimizes:}$

$$R = 2P^2 - 2P + 1$$

Taking the derivative:

$$\frac{dR}{dP} = 4P - 2$$

Setting it to zero:

$$4P - 2 = 0 \Rightarrow P = \frac{1}{2}$$

Eureka!  The postdoc realizes that the optimal way to advance research is to conduct experiments with a 50% probability of falsifying the null hypothesis at each step. She divides the pile of hay into two equal sized piles at each step.

The postdoc would find the needle in around: 

$$i=\frac{-9}{\log (0.5)}\approx 30\text{ scans}$$

So the postdoc is done in a month. In this analogy, the postdoc can make 3 scientific discoveries in the time it takes the engineer to make 1! This is a big difference. The difference between designing safe experiments and risky experiments can yield a factor of 3 in productivity!

In this analogy, the postdoc is constantly designing experiments with unknown outcomes. "Will my sample have a greater or smaller signal than my last one? Both are equally likely in my guesstimation, but after this experiment I will have a conclusive answer!" she thinks before performing her next conclusive experiment. Her research makes inevitable progress forwards at a maximum rate.

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Takeaways for Researchers

So what does this mean for you as a researcher?

1. Design experiments with a hypothesis.

Have a clear hypothesis, and its opposite - a null hypothesis - that you can rule out one way or another.

2. Make experiments conclusive.

Each test should definitively rule out a possibility. Usually, this is falsifying the null hypothesis.

3. Aim for a 50% success rate.

• If your experiments always succeed in falsifying the null hypothesis, you’re being too conservative.
• If they always fail in falsifying the null hypothesis, you’re wasting time.
• The sweet spot? 50%—where each experiment has an equal chance of disproving your null hypothesis (supporting your hypothesis).

By following this approach, you can maximize your research efficiency and accelerate discovery.

Happy experimenting!