Main


September 1, 2014

"The Metric System Can Be Our Operating System Without Being Our Interface"



(p. C6) The outcome was perhaps foreshadowed, as Mr. Marciano points out, when President Ford, using a customary unit, noted that American industries were "miles ahead" when it came to adopting the metric system.

Mr. Marciano tells his story more or less without editorializing, until the end. Surveying the centuries of fights over measurement, he finishes on a rather intriguing point: Standardization no longer matters that much.


. . .


. . . , with the computerization of life, we don't have to worry about converting from one measurement to another; our software does this for us. We can still speak in pounds or feet, even if everything in the world of manufacturing and technology is really, at bottom, done in the metric system. In the evocative terminology of Mr. Marciano, "the metric system can be our operating system without being our interface."



For the full review, see:

SAMUEL ARBESMAN. "Liters and Followers; Gerald Ford once proudly declared the country was 'miles ahead' in converting to the metric system." The Wall Street Journal (Sat., Aug. 2, 2014): C6.

(Note: ellipses added.)

(Note: the online version of the review has the date Aug. 1, 2014, and has the title "Book Review: 'Whatever Happened to the Metric System?' by John Bemelmans Marciano; Gerald Ford once proudly declared the country was 'miles ahead' in converting to the metric system." )


The book being reviewed is:

Marciano, John Bemelmans. Whatever Happened to the Metric System?: How America Kept Its Feet. New York: Bloomsbury USA, 2014.






August 28, 2014

"A Few Really Good Artisanal Cheese Shops Is No Substitute for a Strong School System"



(p. 836) Moretti's writing on the "creative class" takes issue with policies associated with Richard Florida, who has exerted a considerable influence on local policymakers worldwide. Moretti uses the example of Berlin, which is a cool place full of creative types but still isn't much of an economic powerhouse, to make the case against Florida's recommendations.


. . .


A problem exists if city governments start thinking that their main job is to be hip rather than competent. Having a few really good artisanal cheese shops is no substitute for a strong school system. Local leaders would do well to remember that an externality-creating skilled resident is as likely to be a forty-two-year-old mother who works in (p. 837) a lab as a twenty-five-year-old looking for a good time. The forty-two-year-old's tastes in local amenities are likely to be quite different from those of the twenty-five-year-old. If Moretti's caution against creative class policies achieves that end, then it will have done something quite positive.



For the full review, see:

Glaeser, Edward. "A Review of Enrico Moretti's the New Geography of Jobs." Journal of Economic Literature 51, no. 3 (Sept. 2013): 825-37.

(Note: ellipsis added.)


The book under review is:

Moretti, Enrico. The New Geography of Jobs. New York: Houghton Mifflin Harcourt Publishing Co., 2012.






August 27, 2014

Big Increase in Costs of Adhering to Moore's Law



(p. 219) Harald Bauer, Jan Veira, and Florian Weig consider "Moore's Law: Repeal or Renewal?" "Moore's law states that the number of transistors on integrated circuits doubles every two years, and for the past four decades it has set the pace for progress in the semiconductor industry. . . . Adherence to Moore's law has led to continuously falling semiconductor prices. Per-bit prices of dynamic random-access memory chips, for example, have fallen by as much as 30 to 35 percent a year for several decades. . . . Some estimates ascribe up to 40 percent of the global productivity growth achieved during the last two decades to the expansion of information and communication technologies made possible by semiconductor performance and cost improvements." But this continued technological progress comes at an ever-higher price. "A McKinsey analysis shows that moving from 32nm (p. 220) to 22nm nodes on 300-millimeter (mm) wafers causes typical fabrication costs to grow by roughly 40 percent. It also boosts the costs associated with process development by about 45 percent and with chip design by up to 50 percent. These dramatic increases will lead to process-development costs that exceed $1 billion for nodes below 20nm. In addition, the state-of-the art fabs needed to produce them will likely cost $10 billion or more. As a result, the number of companies capable of financing next-generation nodes and fabs will likely dwindle." McKinsey Global Institute, December 2013, http://www.mckinsey.com/insights/high_tech_telecoms_internet/moores_law_repeal_or_renewal.


Source:

Taylor, Timothy. "Recommendations for Further Reading." Journal of Economic Perspectives 28, no. 2 (Spring 2014): 213-20.

(Note: ellipses in original.)






August 16, 2014

Process Innovations, Allowed by Deregulation, Creatively Destroyed Railroads



(p. A11) In "American Railroads: Decline and Renaissance in the Twentieth Century," transportation economists Robert E. Gallamore and John R. Meyer provide a comprehensive account of both the decline and the revival.   . . .    They point to excessive government regulation of railroad rates and services as the catalyst for the industry's decay.


. . .


. . . deregulation, Mr. Gallamore and Meyer demonstrate, was a process of creative destruction. Conrail was created by the government in 1976 in a risky, last-ditch attempt to rescue Penn Central and other bankrupt Eastern railroads. It was quickly losing $1 million a day, and its plight helped make the case for the major revamp of railroad regulation that came in 1980. A wave of mergers followed, and the new companies slashed routes and employees on the way to profitability. The shrinking of the national rail system helped, too, as freight companies consolidated traffic on a smaller (and therefore cheaper) network. Freight-train crews were cut to two or three people from four or five. Cabooses were replaced by electronic gear at the end of freight trains.



For the full review, see:

DANIEL MACHALABA. "BOOKSHELF; Long Train Runnin'; Track conditions got so bad in the 1970s that stationary freight cars were falling off the rails thanks to rotting crossties." The Wall Street Journal (Weds., July 9, 2014): A11.

(Note: ellipses added.)

(Note: the online version of the review has the date July 8, 2014, and has the title "BOOKSHELF; Book Review: 'American Railroads' by Robert E. Gallamore and John R. Meyer; Track conditions got so bad in the 1970s that stationary freight cars were falling off the rails thanks to rotting crossties.")


The book under review is:

Gallamore, Robert E., and John R. Meyer. American Railroads: Decline and Renaissance in the Twentieth Century. Cambridge, MA: Harvard University Press, 2014.






August 11, 2014

Lynas Apologizes for Organizing Anti-GM (Genetic Modification) Movement



(p. 115) More than a decade and a half since the commercialization of first-generation agricultural biotechnology, concerns about transgenic crop impacts on human and environmental health remain, even though the experience across a cumulative 1.25 billion hectares suggests the relative safety of first-generation genetically engineered seed. The risks posed by agricultural biotechnology warrant continued attention, and new transgenic crops may pose different and bigger risks. Weighing against uncertain risks are benefits from increased food production, reduced insecticide use, and avoided health risks to food consumers and farm workers. At the same time, adoption is shown to increase herbicide use while reducing herbicide toxicity, save land by boosting yields while also making previously unfarmed lands profitable. Adoption benefits food consumers and farmers but also enriches seed companies that enjoy property right protections over new seed varieties. The (p. 116) balance of scientific knowledge weighs in favor of continued adoption of genetically engineered seed, which may explain why some longtime critics have reversed course. For example, Lord Melchett, who was the head of Greenpeace, has been advising biotechnology companies on overcoming constraints to the technology (St. Clair and Frank forthcoming). Mark Lynas, a journalist and organizer of the anti-GM (genetic modification) movement, publicly apologized for helping start the movement in his "Lecture to Oxford Farming Conference" (2013).

Agricultural biotechnology remains regulated by regimes developed at the introduction of the technology. Whereas precaution may have been appropriate before the relative magnitudes of risks and benefits could be empirically observed, accumulated knowledge suggests overregulation is inhibiting the introduction of new transgenic varieties. Regulation also discourages developing-country applications, where benefits are likely greatest. In the future, new genetic traits may promise greater benefits while also posing novel risks of greater magnitudes than existing traits. Efficient innovation and technology adoption will require different and, perhaps, more stringent regulation in the future, as well as continued insights from researchers, including economists, in order to assess evolving costs and benefits.



Source:

Barrows, Geoffrey, Steven Sexton, and David Zilberman. "Agricultural Biotechnology: The Promise and Prospects of Genetically Modified Crops." Journal of Economic Perspectives 28, no. 1 (Winter 2014): 99-120.






August 4, 2014

Did Intel Succeed in Spite of, or Because of, Tension Between Noyce and Grove?



(p. C5) . . . , much more so than in earlier books on Intel and its principals, the embedded thread of "The Intel Trinity" is the dirty little secret few people outside of Intel knew: Andy Grove really didn't like Bob Noyce.


. . .


(p. C6) . . . there's the argument that one thing a startup needs is an inspiring, swashbuckling boss who lights up a room when he enters it and has the confidence to make anything he's selling seem much bigger and more important than it actually is. And Mr. Malone makes a compelling case that Noyce was the right man for the job in this phase of the company. "Bob Noyce's greatest gift, even more than his talent as a technical visionary," Mr. Malone writes, "was his ability to inspire people to believe in his dreams, in their own abilities, and to follow him on the greatest adventure of their professional lives."


. . .


Noyce hid from Mr. Grove, who was in charge of operations, the fact that Intel had a secret skunk works developing a microprocessor, a single general-purpose chip that would perform multiple functions--logic, calculation, memory and power control. Noyce had the man who was running it report directly to him rather than to Mr. Grove, even though Mr. Grove was his boss on the organizational chart. When Mr. Grove learned what was going on, he became furious, but like the good soldier he was, he snapped to attention and helped recruit a young engineer from Fairchild to be in charge of the project, which ultimately redefined the company.


. . .


Remarkably, none of this discord seemed to have much effect on the company's day-to-day operations. Mr. Malone even suggests that the dysfunction empowered Intel's take-no-prisoners warrior culture.


. . .


So while the humble, self-effacing Mr. Moore, who had his own time in the CEO's chair from 1975 to 1987, played out his role as Intel's big thinker, the brilliant visionary "who could see into the technological future better than anyone alive," Mr. Grove was the kick-ass enforcer. No excuses. For anything.



For the full review, see:

STEWART PINKERTON. "Made in America; A Born Leader, a Frustrated Martinet Built One of Silicon Valley's Giants." The Wall Street Journal (Sat., July 19, 2014): C5-C6.

(Note: ellipses added.)

(Note: the online version of the review has the date July 18, 2014, and has the title "Book Review: 'The Intel Trinity' by Michael S. Malone; A born leader, an ethereal genius and a tough taskmaster built the most important company on the planet.")


The book under review is:

Malone, Michael S. The Intel Trinity: How Robert Noyce, Gordon Moore, and Andy Grove Built the World's Most Important Company. New York: HarperCollins Publishers, 2014.






July 28, 2014

Entrepreneur Gutenberg's Press Creatively Destroyed the Jobs of Scribes



(p. 32) Poggio possessed . . . [a] gift that set him apart from virtually all the other book-hunting humanists. He was a superbly well-trained scribe, with exceptionally fine handwriting, great powers of concentration, and a high degree of accuracy. It is difficult for us, at this distance, to take in the significance of such qualities: our technologies for producing transcriptions, facsimiles, and copies have almost entirely erased what was once an important personal achievement. That importance began to decline, though not at all precipitously, even in Poggio's own lifetime, for by the 1430s a German entrepreneur, Johann Gutenberg, began experimenting with a new invention, movable type, which would revolutionize the reproduction and transmission of texts. By the century's end printers, especially the great Aldus in Venice, would print Latin texts in a typeface whose clarity and elegance remain unrivalled after five centuries. That typeface was based on the beautiful handwriting of Poggio and his humanist friends. What Poggio did by hand to produce a single copy would soon be done mechanically to produce hundreds.


Source:

Greenblatt, Stephen. The Swerve: How the World Became Modern. New York: W. W. Norton & Company, 2011.

(Note: ellipsis, and bracketed word, added.)






July 23, 2014

How Sega Came Out of Nowhere to Leapfrog Near-Monopolist Nintendo



ConsoleWarsBk2014-06-05.jpg

















Source of book image: http://images.eurogamer.net/2014/usgamer/original.jpg/EG11/resize/958x-1/format/jpg



(p. C10) "Console Wars" tells how Sega, an unremarkable Japanese manufacturer of games played in arcades, came out of nowhere to challenge Nintendo for dominance of the videogame world in the first half of the 1990s. Nintendo, which had revived the stagnant home videogame category a few years earlier, had something close to a monopoly in 1990 and behaved accordingly, dictating terms to game developers and treating retailers as peons. Sega, in Mr. Harris's telling, was a disruptive force in a highly concentrated market, introducing more advanced gaming technology, toppling Nintendo from its perch and becoming the largest seller of home videogame hardware in the U.S. by late 1993.

Mr. Harris's hero is a former Mattel executive named Tom Kalinske, who became president of Sega of America, then a small subsidiary, in 1990. Mr. Kalinske assembled a team of crack marketers who would not have gone near Sega but for his reputation and persuasiveness. Within a year and a half, according to Mr. Harris, Mr. Kalinske's leadership, along with a new gaming system called Genesis and a marketing assist from a mascot named Sonic the Hedgehog, made Sega the U.S. market leader in videogames.

And then, after only three years at the top, Sega fell from its pedestal. Sega's management in Japan, suffering mightily from not-invented-here syndrome, rejected Mr. Kalinske's proposals to collaborate with Sony and Silicon Graphics on new gaming systems. Instead, over his objections, Sega pushed out its ill-conceived Saturn game console in 1995. While Saturn flopped, Sony struck gold with its PlayStation; Silicon Graphics sold its chip with amazing graphics capabilities to Nintendo; and the game, so to speak, was over.


. . .


The author admits he has taken liberties: "I have re-created the scenes in this book using the information uncovered from my interviews, facts gathered from supporting documents, and my best judgment as to what version most closely fits the historical record," he writes. The result is more a 558-page screenplay than a credible work of nonfiction.



For the full review, see:

MARC LEVINSON. "Sonic Boom; How a no-name company took on Nintendo, tied its fate to a hyperactive hedgehog, and--briefly--won." The Wall Street Journal (Sat., May 24, 2014): C10.

(Note: ellipsis added.)

(Note: the online version of the review has the date May 23, 2014, an has the title "Book Review: 'Console Wars' by Blake J. Harris; How a no-name company took on Nintendo, tied its fate to a hyperactive hedgehog, and--briefly--won.")


The book under review is:

J., Harris Blake. Console Wars: Sega, Nintendo, and the Battle That Defined a Generation. New York: HarperCollins Publishers, 2014.






July 17, 2014

Open Source Guru Admits to "Mismatched Incentives" and "Serious Trouble Down the Road"



RaymondEricOpenSourceElder2014-06-02.jpg "Eric S. Raymond said that the code-checking system had failed in the case of Heartbleed." Source of caption and photo: online version of the NYT article quoted and cited below.



(p. B1) SAN FRANCISCO -- The Heartbleed bug that made news last week drew attention to one of the least understood elements of the Internet: Much of the invisible backbone of websites from Google to Amazon to the Federal Bureau of Investigation was built by volunteer programmers in what is known as the open-source community.

Heartbleed originated in this community, in which these volunteers, connected over the Internet, work together to build free software, to maintain and improve it and to look for bugs. Ideally, they check one another's work in a peer review system similar to that found in science, or at least on the nonprofit Wikipedia, where motivated volunteers regularly add new information and fix others' mistakes.

This process, advocates say, ensures trustworthy computer code.

But since the Heartbleed flaw got through, causing fears -- as yet unproved -- of widespread damage, members of that world are questioning whether the system is working the way it should.

"This bug was introduced two years ago, and yet nobody took the time to notice it," said Steven M. Bellovin, a computer science professor at Columbia University. "Everybody's job is not anybody's job."


. . .


(p. B2) Unlike proprietary software, which is built and maintained by only a few employees, open-source code like OpenSSL can be vetted by programmers the world over, advocates say.

"Given enough eyeballs, all bugs are shallow" is how Eric S. Raymond, one of the elders of the open-source movement, put it in his 1997 book, "The Cathedral & the Bazaar," a kind of manifesto for open-source philosophy.

In the case of Heartbleed, though, "there weren't any eyeballs," Mr. Raymond said in an interview this week.


. . .


The problem, Mr. Raymond and other open-source advocates say, boils down to mismatched incentives. Mr. Raymond said firms don't maintain OpenSSL code because they don't profit directly from it, even though it is integrated into their products, and governments don't feel political pain when the code has problems.

With OpenSSL, by contrast, "for those that do work on this, there's no financial support, no salaries, no health insurance," Mr. Raymond said. "They either have to live like monks or work nights and weekends. That is a recipe for serious trouble down the road."



For the full story, see:

Perlroth, Nicole. "A Contradiction at the Heart of the Web." The New York Times (Sat., April 19, 2014): B1 & B2.

(Note: ellipses added.)

(Note: the online version of the story was updated APRIL 18, 2014, and has the title "Heartbleed Highlights a Contradiction in the Web.")



Raymond's open source manifesto is:

Raymond, Eric S. The Cathedral & the Bazaar: Musings on Linux and Open Source by an Accidental Revolutionary. Sebastopol, CA: O'Reilly Media, Inc., 1999.






July 14, 2014

Forecasts of Mass Unemployment from Robots Were Wrong



(p. 215) Frank Levy and Richard J. Murnane consider the interaction between workers and machinery in "Dancing with Robots: Human Skills for Computerized Work." "On March 22, 1964, President Lyndon Johnson received a short, alarming memorandum from the Ad Hoc Committee on the Triple Revolution. The memo warned the president of threats to the nation beginning with the likelihood that computers would soon create mass unemployment: 'A new era of production has begun. Its principles of organization are as different from those of the industrial era as those of the industrial era were different from the agricultural. The cybernation revolution has been brought about by the combination of the computer and the automated self-regulating machine. This results in a system of almost unlimited productive capacity which requires progressively less human labor. Cybernation is already reorganizing the economic and social system to meet its own needs.' The memo was signed by luminaries including Nobel Prize winning chemist Linus Pauling, Scientific American publisher Gerard Piel, and economist Gunnar Myrdal (a future Nobel Prize winner). Nonetheless, its warning was only half right. There was no mass unemployment--since 1964 the economy has added 74 million jobs. But computers have changed the jobs that are available, the skills those jobs require, and the wages the jobs pay. For the foreseeable future, the challenge of "cybernation" is not mass unemployment but the need to educate many more young people for the jobs computers cannot do." Third Way, 2013, http://content.thirdway.org /publications/714/Dancing-With-Robots.pdf.


Source:

Taylor, Timothy. "Recommendations for Further Reading." Journal of Economic Perspectives 27, no. 4 (Fall 2013): 211-18.

(Note: italics in original.)






July 12, 2014

They Begged for a Chance to Help Edison Create the Future



(p. 289) He, and anyone working for him, were perceived as standing at the very outer edge of the present, where it abuts the future. When a young John Lawson sought a position at Edison's lab and wrote in 1879 that he was "willing to do anything, dirty work--become anything, almost a slave, only give me a chance," he spoke with a fervency familiar to applicants knocking today on the door of the hot tech company du jour. In the age of the computer, different companies at different times--for example, Apple in the early 1980s, Microsoft in the early 1990s, Google in the first decade of the twenty-first century--inherited the temporary aura that once hovered over Edison's Menlo Park laboratory, attracting young talents who applied in impossibly large numbers, all seeking a role in the creation of the zeitgeist (and, like John Ott, at the same time open to a chance to become wealthy). The lucky ones got inside (Lawson got a position and worked on electric light).


Source:

Stross, Randall E. The Wizard of Menlo Park: How Thomas Alva Edison Invented the Modern World. New York: Crown Publishers, 2007.






July 9, 2014

French Protest Amazon, but Buy There for Low Prices



(p. B1) LONDON -- On weekends, Guillaume Rosquin browses the shelves of local bookstores in Lyon, France. He enjoys peppering the staff with questions about what he should be reading next. But his visits, he says, are also a protest against the growing power of Amazon. He is bothered by the way the American online retailer treats its warehouse employees.

Still, as with millions of other Europeans, there is a limit to how much he will protest.

"It depends on the price," said Mr. Rosquin, 49, who acknowledged that he was planning to buy a $400 BlackBerry smartphone on Amazon because the handset was not yet available on rival French websites. "If you can get something for half-price at Amazon, you may put your issues with their working conditions aside."



For the full story, see:

MARK SCOTT. "Principles Are No Match for Europe's Love of U.S. Web Titans." The New York Times (Mon., JULY 7, 2014): B1 & B3.

(Note: the online version of the story has the date JULY 6, 2014.)







July 1, 2014

Natural Resources Increase through Innovation



SolarPanelsDunhuangChina2014-05-31.jpg "A worker inspects solar panels in Dunhuang, China. We have an estimated supply of one million years of tellurium, a rare element used in some panels." Source of caption and photo: online version of the WSJ article quoted and cited below.



(p. C1) How many times have you heard that we humans are "using up" the world's resources, "running out" of oil, "reaching the limits" of the atmosphere's capacity to cope with pollution or "approaching the carrying capacity" of the land's ability to support a greater population? The assumption behind all such statements is that there is a fixed amount of stuff--metals, oil, clean air, land--and that we risk exhausting it through our consumption.


. . .


But here's a peculiar feature of human history: We burst through such limits again and again. After all, as a Saudi oil minister once said, the Stone Age didn't end for lack of stone.


. . .


Economists call the same phenomenon innovation. What frustrates them about ecologists is the latter's tendency to think in terms of static limits. Ecologists can't seem to see that when whale oil starts to run out, petroleum is discovered, or that when farm yields flatten, fertilizer comes along, or that when glass fiber is invented, demand for copper falls.


. . .


(p. C2) . . ., Mr. Ausubel, together with his colleagues Iddo Wernick and Paul Waggoner, came to the startling conclusion that, even with generous assumptions about population growth and growing affluence leading to greater demand for meat and other luxuries, and with ungenerous assumptions about future global yield improvements, we will need less farmland in 2050 than we needed in 2000. (So long, that is, as we don't grow more biofuels on land that could be growing food.)


. . .


The economist and metals dealer Tim Worstall gives the example of tellurium, a key ingredient of some kinds of solar panels. Tellurium is one of the rarest elements in the Earth's crust--one atom per billion. Will it soon run out? Mr. Worstall estimates that there are 120 million tons of it, or a million years' supply altogether.


. . .


Part of the problem is that the word "consumption" means different things to the two tribes. Ecologists use it to mean "the act of using up a resource"; economists mean "the purchase of goods and services by the public" (both definitions taken from the Oxford dictionary).

But in what sense is water, tellurium or phosphorus "used up" when products made with them are bought by the public? They still exist in the objects themselves or in the environment. Water returns to the environment through sewage and can be reused. Phosphorus gets recycled through compost. Tellurium is in solar panels, which can be recycled. As the economist Thomas Sowell wrote in his 1980 book "Knowledge and Decisions," "Although we speak loosely of 'production,' man neither creates nor destroys matter, but only transforms it."


. . .

If I could have one wish for the Earth's environment, it would be to bring together the two tribes--to convene a grand powwow of ecologists and economists. I would pose them this simple question and not let them leave the room until they had answered it: How can innovation improve the environment?



For the full commentary, see:

MATT RIDLEY. "The Scarcity Fallacy; Ecologists worry that the world's resources come in fixed amounts that will run out, but we have broken through such limits again and again." The Wall Street Journal (Sat., April 26, 2014): C1-C2.

(Note: ellipses added.)

(Note: the online version of the commentary has the date April 25, 2014, and has the title "The World's Resources Aren't Running Out; Ecologists worry that the world's resources come in fixed amounts that will run out, but we have broken through such limits again and again.")






June 27, 2014

Instead of 50 Silicon Valleys, Andreessen Sees 50 Kinds of Silicon Valley



AndreessenMarcCofounderNetscape2014-05-31.jpg "Marc Andreessen, co-founder of the first major web browser, Netscape, has a record for knowing what's coming next with technology." Source of caption and photo: online version of the NYT article quoted and cited below.



(p. B8) Mr. Andreessen said new valleys will eventually emerge. But they won't be Silicon Valley copycats.

Over the past couple of years, venture firms have invested in start-ups in Los Angeles, New York, Chicago and all over China. Los Angeles, for example, is home to Snapchat, Tinder, Whisper, Oculus VR and Beats, some of the big tech stories of the year. Mr. Andreessen said another hot place is Atlanta, the home of Georgia Tech.

But he offers a caveat.

"My personal view is that Silicon Valley will continue to take a disproportionate share of the No. 1 positions in great new markets, and I think that's just a reflection that the fact that the valley works as well as it does," Mr. Andreessen said.

There is a caveat to his caveat.

In Mr. Andreessen's view, there shouldn't be 50 Silicon Valleys. Instead, there should be 50 different kinds of Silicon Valley. For example, there could be Biotech Valley, a Stem Cell Valley, a 3-D Printing Valley or a Drone Valley. As he noted, there are huge regulatory hurdles in many of these fields. If a city wanted to spur innovation around drones, for instance, it might have to remove any local legal barriers to flying unmanned aircraft.



For the full interview, see:

NICK BILTON. "DISRUPTIONS; Forecasting the Next Big Moves in Tech." The New York Times (Mon., MAY 19, 2014): B8.

(Note: the online version of the interview has the date MAY 18, 2014, and has the title "DISRUPTIONS; Marc Andreessen on the Future of Silicon Valley(s), and the Next Big Technology." )






June 15, 2014

"Apple Bonds Are Giffen Goods"



AppleCampus2014-05-31.jpg "New bonds sold by Apple have been called "Giffen goods," after Sir Robert Giffen, a Scottish economist who noted that the prices of some goods can defy the laws of supply and demand." Source of caption and photo: online version of the NYT article quoted and cited below.


(p. B1) . . . Hans Mikkelsen, a credit strategist at Bank of America Merrill Lynch, promptly proclaimed that "Apple bonds are Giffen goods."

Giffen goods, named after Sir Robert Giffen, a 19th-century Scottish statistician and economist who discovered they could exist, defy the normal law of supply and demand. Raise the price, and people will buy more.

They are extremely rare.

The classic example -- and the only one I had heard of before Apple sold its new bonds -- was potatoes at a time when they were the chief source of nourishment for Irish peasants. If potato prices fell, the peasants could afford more meat and would therefore eat fewer potatoes. When potato prices rose, they could no longer afford meat and would consume more potatoes.



For the full story, see:

RAPHAEL MINDER. "Tempting Europe With Ugly Fruit." The New YorkTimes, First Section (Sun., MAY 25, 2014): 6 & 8.

(Note: ellipsis added.)

(Note: the online version of the story has the date MAY 24, 2014. )



GiffenSirRobertScottishEconomist2014-05-31.jpg











"Sir Robert Giffen was a Scottish economist." Source of caption and photo: online version of the NYT article quoted and cited above.







June 10, 2014

Phonograph Allowed Middle Class to Bring the Show to Their "Castle," Like Kings Already Could



(p. 218) Once Edison's marketers squarely addressed the urban middle class, they devised advertising that made prospective customers feel as entitled to enjoy the pleasures of recorded music as anyone. "When the (p. 219) King of England wants to see a show, they bring the show to the castle and he hears it alone in his private theater." So said an advertisement in 1906 for the Edison phonograph. It continued: "If you are a king, why don't you exercise your kingly privilege and have a show of your own in your own house."


Source:

Stross, Randall E. The Wizard of Menlo Park: How Thomas Alva Edison Invented the Modern World. New York: Crown Publishers, 2007.






June 6, 2014

Edison Sold General Electric Shares to Keep His Lab and Mine Open



(p. 193) In 1902, at a time when General Electric shares were trading at a historic high and well after Edison had sold his, Mallory happened to be traveling with him and saw in the newspaper the eye-popping closing price. Edison asked what his stake would have been worth had he held on to it. Mallory quickly worked out the number: over $4 million. Hearing this, Edison remained silent, keeping a serious expression for about fifteen seconds. Then his face lit up and he said, "Well, it's all gone, but we had a good time spending it."

(p. 194) The story would be retold by Edison's hagiographers many times. The evidence suggests that Edison did have a jolly time, which, to him, was well worth the $4 million.



Source:

Stross, Randall E. The Wizard of Menlo Park: How Thomas Alva Edison Invented the Modern World. New York: Crown Publishers, 2007.






June 3, 2014

Public Cannot Go into Space Because of Government Run Space Programs



BransonRichard2014-04-25.jpg "'You don't have to be a rocket scientist to be able to run a spaceship company,' says Richard Branson." Source of caption and photo: online version of the WSJ article quoted and cited below.


(p. C11) Richard Branson, founder of the Virgin Group, is just months away from launching what he considers "the biggest Virgin company we've ever built." At 63, he's already founded multiple businesses worth billions, including a record label and a mobile company. But it's his foray into outer space with Virgin Galactic that has Mr. Branson excited.


. . .


Safety has been one of the biggest challenges in building Virgin Galactic. In 2007, two workers died after a tank explosion during a rocket test, and three were seriously wounded. The accident, which occurred at a partner company's facility, delayed the program for an estimated 18 months.

Risk factors weigh on the minds of potential customers as well, especially after NASA's 1986 Challenger disaster, in which seven crew members, including a schoolteacher, died. Mr. Branson thinks that today most people would want to go into space if they could be guaranteed a safe return trip. "Sadly, I think because the space program was run by governments, there was never any real interest in enabling members of the public to go to space after they tried once" with the Challenger, he explains. "After that, they decided not to take any risks whatsoever." He adds, "I would say 90% of people my age thought they would go to space because they saw the moon landing."



For the full story, see:

ALEXANDRA WOLFE. "WEEKEND CONFIDENTIAL; Richard Branson; The Virgin Group founder on his out-of-this world venture: space travel." The Wall Street Journal (Sat., Nov. 2, 2013): C11.

(Note: ellipsis added.)

(Note: the online version of the story has the date Nov. 1, 2013, and has the title "WEEKEND CONFIDENTIAL; Richard Branson on Space Travel; The Virgin Group founder on his latest out-of-this world venture, Virgin Galactic'.")






June 2, 2014

Edison Failed to Stop Film Projectors from Disrupting His Kinetoscope




Edison tried to kill film projection because he thought the whole country would only need 10 projectors, while they could sell a great many of the single-view kinetoscopes. But the wonderful twist to the story is that it DID NOT WORK because Edison could not stop the Lathams and others from coming forward and disrupting the kinetoscope.


(p. 205) The Lathams were not the only exhibitors frustrated with Edison's kinetoscope, and the others urged Edison to introduce a projection machine. Edison was adamant: no. He reasoned that the peephole machines (p. 206) were selling well and at a good profit. The problem with projection was that it would work all too well--if he replaced the inefficient kinetoscope with projection systems that could serve up the show to everyone, "there will be a use for maybe about ten of them in the whole United States." He concluded, "Let's not kill the goose that lays the golden egg."

At Edison's lab in Orange, without his boss's approval, W. K. L. Dickson carried out research on film projection on his own and shared his findings with a friend who was a keen listener: Otway Latham. And when Dickson accepted an invitation to try a projection experiment in a physics laboratory at Columbia, who should show up but Otway's father, Professor Latham. The Lathams made an offer to Dickson--come join us and we'll give you a quarter-share interest in the business--but Dickson was unwilling to make the leap. When Edison got word of his fraternizing with the Lathams, however, and failed to reassure Dickson that he believed Dickson's dealings had been perfectly honorable, Dickson felt he had no choice but to resign. The exact chronology of what he did and what he knew at various points preceding his resignation would be the subject of much litigation that followed. But regardless of intellectual-property issues, Edison lost the one person on his staff who would have been most valuable to him in developing a projection system.

The Lathams and Dickson had discovered that sending a bright light through a moving strip of film did not project satisfactorily because any given image did not absorb enough light before it sped on. The Lathams came up with a partial solution, which was to make the film wider, providing more area for the light to catch as each image went by. The projected images were about the size of a window and good enough to unveil publicly. Professor Latham gave a demonstration of his newly christened Pantoptikon to reporters in April 1895.



Source:

Stross, Randall E. The Wizard of Menlo Park: How Thomas Alva Edison Invented the Modern World. New York: Crown Publishers, 2007.






May 31, 2014

When Labor Markets Are Flexible, Workers Need Not Fear New Technology



(p. 6) Driverless vehicles and drone aircraft are no longer science fiction, and over time, they may eliminate millions of transportation jobs. Many other examples of automatable jobs are discussed in "The Second Machine Age," a book by Erik Brynjolfsson and Andrew McAfee, and in my own book, "Average Is Over." The upshot is that machines are often filling in for our smarts, not just for our brawn -- and this trend is likely to grow.

How afraid should workers be of these new technologies? There is reason to be skeptical of the assumption that machines will leave humanity without jobs. After all, history has seen many waves of innovation and automation, and yet as recently as 2000, the rate of unemployment was a mere 4 percent. There are unlimited human wants, so there is always more work to be done. The economic theory of comparative advantage suggests that even unskilled workers can gain from selling their services, thereby liberating the more skilled workers for more productive tasks.


. . .


Labor markets just aren't as flexible these days for workers, especially for men at the bottom end of the skills distribution.


. . .


Across the economy, a college degree is often demanded where a high school degree used to suffice.


. . .


The law is yet another source of labor market inflexibility: The number of jobs covered by occupational licensing continues to rise and is almost one-third of the work force. We don't need such laws for, say, barbers or interior designers, although they are commonly on the books.


. . .


Many . . . labor market problems were brought on by the financial crisis and the collapse of market demand. But it would be a mistake to place all the blame on the business cycle. Before the crisis, for example, business executives and owners didn't always know who their worst workers were, or didn't want to engage in the disruptive act of rooting out and firing them. So long as sales were brisk, it was easier to let matters lie. But when money ran out, many businesses had to make the tough decisions -- and the axes fell. The financial crisis thus accelerated what would have been a much slower process.

Subsequently, some would-be employers seem to have discriminated against workers who were laid off in the crash. These judgments weren't always fair, but that stigma isn't easily overcome, because a lot of employers in fact had reason to identify and fire their less productive workers.



For the full commentary, see:

TYLER COWEN. "Economic View; Automation Alone Isn't Killing Jobs." The New York Times, SundayBusiness Section (Sun., APRIL 6, 2014): 6.

(Note: ellipses added.)

(Note: the online version of the commentary has the date APRIL 5, 2014.)



The Brynjolfsson and McAfee book mentioned is:

Brynjolfsson, Erik, and Andrew McAfee. The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies. New York: W. W. Norton & Company, 2014.


The Cowen book that Cowen mentions is:

Cowen, Tyler. Average Is Over: Powering America Beyond the Age of the Great Stagnation. New York: Dutton Adult, 2013.






May 25, 2014

Entrepreneurial Consumer J.P. Morgan "Handled Setbacks with Equanimity"




Schumpeter wrote that the entrepreneur is the one who overcomes obstacles to get the job done (1950, p. 132). Obstacles come in many forms. One of them is consumer resistance to change. So one key contributor to the technological progress is the "entrepreneurial consumer" who is willing to invest in new, buggy, possibly dangerous technologies at an early stage. (Paul Nodskov, a student in my spring 2014 Economics of Technology seminar suggested using the phrase "entrepreneurial consumer.")

Alexis de Tocqueville observed that in contrast to Europeans, Americans were "restless in the midst of their prosperity" (2000 [first published 1835], Ch. 13). Perhaps even that early, America had more entrepreneurial consumers?


(p. 131) Morgan prized being ahead of everyone else, and the next year was concerned that his plant was already less than state of the art, a suspicion that was confirmed when he persuaded Edison to send Edward Johnson to the house for an evaluation. Johnson was instructed to upgrade the equipment and also to devise a way to provide an electric light that would sit on Morgan's desk in his library. At a time when the very concept of an electrical outlet and detachable electrical appliances had yet to appear, this posed a significant challenge. Johnson's solution was to run wires beneath the floor to metal plates that were installed in different places beneath the rugs. One of the legs of the desk was equipped with sharp metal prongs, designed to make contact with one of the plates when moved about the room.

In conception, it was clever; in implementation, it fell short of ideal. On the first evening when the light was turned on, there was a flash, followed by a fire that quickly engulfed the desk and spread across the rug before being put out. When Johnson was summoned to the house the next morning, he was shown into the library, where charred debris was piled in a heap. He expected that when Morgan appeared, he would angrily announce that the services of Edison Electric were no longer needed.

(p. 132) "Well?" Morgan stood in the doorway, with Mrs. Morgan standing behind him, signaling Johnson with a finger across her lips not to launch into elaborate explanations. Johnson cast a doleful eye at the disaster in the room and remained silent.

"Well, what are you going to do about it?" Morgan asked. Johnson said the fault was his own and that he would personally reinstall everything, ensuring that it would be done properly.

"All right. See that you do." Morgan turned and left. The eager purchaser of first-generation technology handled setbacks with equanimity. "I hope that the Edison Company appreciates the value of my house as an experimental station," he would later say. A new installation with second-generation equipment worked well, and Morgan held a reception for four hundred guests to show off his electric lights. The event led some guests to place their own orders for similar installations. Morgan also donated entire systems to St. George's Church and to a private school, dispatching Johnson to oversee the installation as a surprise to the headmistress. The family biographer compared Morgan's gifts of electrical power plants to his sending friends baskets of choice fruit.



Source:

Stross, Randall E. The Wizard of Menlo Park: How Thomas Alva Edison Invented the Modern World. New York: Crown Publishers, 2007.



Schumpeter's book is:

Schumpeter, Joseph A. Capitalism, Socialism and Democracy. 3rd ed. New York: Harper and Row, 1950.

The other book I mention, is:

de Tocqueville, Alexis. Democracy in America. Chicago: University of Chicago Press, 2000 [first published in two volumes in 1835 and 1840].






May 19, 2014

Open Source Heartbleed Bug Sends Internet "into a Panic"




Opponents of patents often point to the open source movement as an alternative. The Heartbleed bug illustrates a big downside to open source:


(p. B1) The encryption flaw that punctured the heart of the Internet this week underscores a weakness in Internet security: A good chunk of it is managed by four European coders and a former military consultant in Maryland.

Most of the 11-member team are volunteers; only one works full time. Their budget is less than $1 million a year. The Heartbleed bug, revealed Monday, was the product of a fluke introduced by a young German researcher.


. . .


The OpenSSL Project was founded in 1998 to create a free set of encryption tools that has since been adopted by two-thirds of Web servers. Websites, network-equipment companies and governments use OpenSSL tools to protect personal and other sensitive information online.

So when researchers at Google Inc. and Codenomicon on Monday stated that Heartbleed could allow hackers to steal such data, the Internet went into a panic.


. . .


(p. B3) Earlier in the day, a German volunteer coder admitted that he had unintentionally introduced the bug on New Year's Eve 2011 while working on bug fixes for OpenSSL. . . .

Errors in complex code are inevitable--Microsoft Corp., Apple Inc. and Google announce flaws monthly. But people close to OpenSSL, which relies in part on donations, say a lack of funding and manpower exacerbated the problem and allowed it to go unnoticed for two years.


. . .


The OpenSSL Project counts a sole full-time developer: Stephen Henson, a 46-year-old British cryptographer with a Ph.D. in mathematics. Two other U.K. residents and a developer in Germany fill out the project's management team.

Associates describe Mr. Henson as brilliant but standoffish and overloaded with work.


. . .


Geoffrey Thorpe, an OpenSSL volunteer on the development team, said he has little time to spend on the project because of his day job at a hardware technology company.



For the full story, see:

DANNY YADRON. "Internet Security Relies on Very Few." The Wall Street Journal (Sat., April 12, 2014): B1 & B3.

(Note: ellipses added.)

(Note: the online version of the story was updated April 11, 2014, and has the title "TECHNOLOGY; Heartbleed Bug's 'Voluntary' Origins; Internet Security Relies on a Small Team of Coders, Most of Them Volunteers; Flaw Was a Fluke.")






May 16, 2014

"The Experts Keep Getting It Wrong and the Oddballs Keep Getting It Right"



HydraulicFracturingOperationInColorado2014-04-25.jpg "A worker at a hydraulic fracturing and extraction operation in western Colorado on March 29[, 2014]." Source of caption and photo: online version of the WSJ article quoted and cited below.



(p. C3) The experts keep getting it wrong. And the oddballs keep getting it right.

Over the past five years of business history, two events have shocked and transformed the nation. In 2007 and 2008, the housing market crumbled and the financial system collapsed, causing trillions of dollars of losses. Around the same time, a few little-known wildcatters began pumping meaningful amounts of oil and gas from U.S. shale formations. A country that once was running out of energy now is on track to become the world's leading producer.

What's most surprising about both events is how few experts saw them coming--and that a group of unlikely outsiders somehow did.


. . .


Less well known, but no less dramatic, is the story of America's energy transformation, which took the industry's giants almost completely by surprise. In the early 1990s, an ambitious Chevron executive named Ray Galvin started a group to drill compressed, challenging formations of shale in the U.S. His team was mocked and undermined by dubious colleagues. Eventually, Chevron pulled the plug on the effort and shifted its resources abroad.

Exxon Mobil also failed to focus on this rock--even though its corporate headquarters in Irving, Texas, were directly above a huge shale formation that eventually would flow with gas. Later, it would pay $31 billion to buy a smaller shale pioneer.

"I would be less than honest if I were to say to you [that] we saw it all coming, because we did not, quite frankly," Rex Tillerson, Exxon Mobil's chairman and CEO said last year in an interview at the Council on Foreign Relations.


. . .


The resurgence in U.S. energy came from a group of brash wildcatters who discovered techniques to hydraulically fracture--or frack--and horizontally drill shale and other rock. Many of these men operated on the fringes of the oil industry, some without college degrees or much background in drilling, geology or engineering.



For the full commentary, see:

GREGORY ZUCKERMAN. "ESSAY; The Little Guys Who Saw Our Economic Future; Corporate Caution and Complacency Come at a Cost." The Wall Street Journal (Sat., Nov. 2, 2013): C3.

(Note: ellipsis, and bracketed year in caption, added.)

(Note: the online version of the commentary was updated Nov. 3, 2013, and has the title "ESSAY; The Outsiders Who Saw Our Economic Future; In both America's energy transformation and the financial crisis, it took a group of amateurs to see what was coming." )


Zuckerman's commentary, quoted above, is partly based on his book:

Zuckerman, Gregory. The Frackers: The Outrageous inside Story of the New Billionaire Wildcatters. New York: Portfolio/Penguin, 2013.






May 10, 2014

Television Improved Test Scores



GentzkowMatthewChicagoBatesClark2014-04-26.jpg "Economist Matthew Gentzkow found media slant to be a function of audience preference." Source of caption and photo: online version of the WSJ article quoted and cited below.


(p. A2) An economist known for pioneering work on slanted coverage in the news media won the John Bates Clark Medal, one of the profession's most prestigious honors.

Matthew Gentzkow, a professor at the University of Chicago's Booth School of Business, on Thursday was awarded the Clark medal by the American Economic Association, which every year honors the nation's most promising economist under age 40.


. . .


A big theme in Mr. Gentzkow's work is finding innovative ways to tackle questions that expand economists' tool kits.

. . . , in 2008, he and Mr. Shapiro examined the fact that different parts of the U.S. got access to television at different times to gauge TV's effects on high-school students in the 1960s.

The economists found that children who lived in cities that gave them more exposure to TV in early childhood performed better on tests than those with less exposure. The work also suggested TV helped American children in non-English-speaking households do better in school.



For the full story, see:

NEIL SHAH. "Economist Honored for Work on Media Slant." The Wall Street Journal (Fri., April 18, 2014): 12.

(Note: ellipses added.)

(Note: the online version of the story has the date April 17, 2014.)


The Gentzkow and Shapiro paper on the effects of television, is:

Gentzkow, Matthew, and Jesse M. Shapiro. "Preschool Television Viewing and Adolescent Test Scores: Historical Evidence from the Coleman Study." Quarterly Journal of Economics 123, no. 1 (Feb. 2008): 279-323.






May 4, 2014

Gilder's Information Theory of Capitalism Will Boost Morale of Innovative Entrepreneurs



KnowledgeAndPowerBK2014-04-24.jpg











Source of book image: online version of the WSJ review quoted and cited below.







(p. A13) Individuals like Ford and Jobs are key figures in the economic paradigm that George Gilder lays out in "Knowledge and Power." He calls for an "information theory of capitalism" in which the economy is driven by a dynamic marketplace, with information widely (and freely) distributed. The most important feature of such an economy, Mr. Gilder writes, is the overthrow of "equilibrium," and the most important actors are inventors and entrepreneurs whose breakthrough ideas are responsible for "everything useful or interesting" in commercial life.


. . .


Aspiring owners shouldn't look to "Knowledge and Power" for practical advice on starting a company, but Mr. Gilder's case for the central role of entrepreneurship might boost their morale. Certainly his argument could not be more timely. Census Bureau data show that startups were responsible for nearly all new job creation from 1996 to 2009. Yet entrepreneurship itself (as measured by new business formation) has been stagnant for about two decades. Thus the important question for America's future may well be, as Mr. Gilder says, "how we treat our entrepreneurs." He persuasively shows that creating a more supportive climate for entrepreneurs--by clearing away burdensome regulations and freeing information from its current imprisonment--will result in a more prosperous and vigorous society, creating not only more jobs but more Jobs.



For the full review, see:

MATTHEW REES. "BOOKSHELF; The Real Market-Maters; Economists as far back as Adam Smith have undervalued entrepreneurs--the restless, inventive, job-creating engines of the economy." The Wall Street Journal (Tues., March 18, 2014): A13.

(Note: ellipsis added.)

(Note: the online version of the review has the date March 17, 2014, and has the title "BOOKSHELF; Book Review: 'Knowledge and Power' by George Gilder
Economists as far back as Adam Smith have undervalued entrepreneurs--the restless, inventive, job-creating engines of the economy.")


The book under review is:

Gilder, George. Knowledge and Power: The Information Theory of Capitalism and How It Is Revolutionizing Our World. Washington, D.C.: Regnery Publishing, Inc., 2013.






April 27, 2014

Government Wire Inspectors Only Showed Up to Get Their Pay



(p. 121) Edison had originally planned to offer service to the entirety of south Manhattan, south of Canal Street and north of Wall Street, but engineering considerations forced him to carve out a smaller district, bounded by Wall, Nassau, Spruce, and Ferry Streets. Still, his company had to place underground some eighty thousand linear feet of electrical wire. This had never been attempted before, so it should not have been a surprise when H. O. Thompson, the city's commissioner of public works, summoned Edison to his office to explain that the city would have to be assured that the lines were installed safely. Thompson was assigning five inspectors to oversee the work, whose cost would be covered by an assessment of $5 per day, per inspector, payable (p. 122) each week. When Edison left Thompson's office, he was crestfallen, anticipating the harassment and delays ahead that would be caused by the inspectors' interference. On the day that work began, however, the inspectors failed to appear. Their first appearance was on Saturday afternoon, to draw their pay. This set the pattern that the inspectors followed as the work proceeded through 1881 and into 1882.


Source:

Stross, Randall E. The Wizard of Menlo Park: How Thomas Alva Edison Invented the Modern World. New York: Crown Publishers, 2007.






April 15, 2014

Arc Lights Leapfrogged Gas Lights Before Incandescents Leapfrogged Them Both



(p. 85) The gas interests had been dealt a number of recent setbacks even before Edison's announcement of a newly successful variant of electric light. An "enormous abandonment of gas" by retail stores in cities, who now could use less expensive kerosene, was noticed. The shift was attributed not to stores' preference for kerosene but as a means of escaping "the arrogance of the gas companies." Arc lights had now become a newly competitive threat, too. The previous month, Charles Brush had set up his lights in an exhibition hall in New York and then added a display in Boston. Sales to stores followed in several cities; then, as word spread, other establishments sought to obtain the cachet bestowed by the latest technology. William Sharon, a U.S. senator for and energetic booster of California, retrofitted the public spaces of his Palace Hotel in San Francisco with arc lights that replaced 1,085 gas jets.


Source:

Stross, Randall E. The Wizard of Menlo Park: How Thomas Alva Edison Invented the Modern World. New York: Crown Publishers, 2007.






April 11, 2014

Edison, Not Antitrust, Reduced Power of Hated Gas Monopolies




Counterbalancing the angst of those hurt by the death of an old technology is sometimes the triumph creative destruction provides to those who were less well-served by the old technology. Some look to governments to restrain a dominant technology; but sometimes a more effective way is to replace the old technology through creative destruction's leapfrog competition.


(p. 84) Gaslight monopolies had few friends outside of the ranks of shareholders. At the beginning of the nineteenth century, gaslight had been viewed as pure and clean; seventy years later, its shortcomings had become all too familiar: it was dirty, soiled interior furnishings, and emit-(p. 85)ted unhygienic fumes. It was also expensive, affordable for indoor lighting only in the homes of the wealthy, department stores, or government buildings. The New York Times almost spat out the following description of how gas companies conducted business: "They practically made the bills what they pleased, for although they read off the quantity by the meter, that instrument was their own, and they could be made to tell a lie of any magnitude.... Everybody has always hated them with a righteous hatred."

Edison credited the gas monopoly for providing his original motivation to experiment with electric light years before in his Newark laboratory. Recalling in October 1878 his unpleasant dealings years earlier with the local gas utility, which had threatened to tear out their meter and cut off the gas, Edison said, "When I remember how the gas companies used to treat me, I must say that it gives me great pleasure to get square with them." The Brooklyn Daily Eagle printed an editorial titled "Revenge Is Sweet" in which it observed that the general public greatly enjoyed the discomfort of the gas companies, too: "To see them squirm and writhe is a public satisfaction that lifts Edison to a higher plane than that of the wonderful inventor and causes him to be regarded as a benefactor of the human race, the leading deity of popular idolatry."



Source:

Stross, Randall E. The Wizard of Menlo Park: How Thomas Alva Edison Invented the Modern World. New York: Crown Publishers, 2007.

(Note: ellipsis in original.)






April 9, 2014

Patent Trial and Appeal Board May Be Invalidating Low Quality Patents




One of the common complaints about the U.S. patent system for the past couple of decades is that the Patent and Trademark Office (PTO) has been approving too many low quality patents, that are then used by patent holders to extort licensing fees or out-or-court settlements from alleged infringers. One way in which the America Invents Act, signed in September 2011, tried to respond to the complaint was to strengthen the post-approval re-examination process for patents. The article quoted below suggests that the strengthened process may be having the intended effect.



(p. B4) The Patent Trial and Appeal Board is a little known but powerful authority that often allows a company embroiled in a lawsuit to skip the question of whether it infringed a patent--and challenge whether the patent should have been issued in the first place.

The board was launched in September 2012 as part of the massive patent overhaul passed by Congress the previous year and is currently staffed by 181 judges, many of whom have deep experience in intellectual property or technical fields like chemical and electrical engineering. Through last Thursday it had received 1,056 requests to challenge patents, far more than were received by any federal court over the same time period.

The board is part of the Patent and Trademark Office. But so far, it hasn't shied away from upending the office's decisions to issue certain patents. As of last week, the board had issued 25 written decisions concerning patent challenges, and upheld parts of challenged patents in only a few of them.


. . .


In recent months, Randall Rader, the chief judge of the Federal Circuit, has been one of the board's most outspoken critics. At a conference of intellectual-property lawyers last fall, the judge called the board's panels "death squads...killing property rights."

In an interview with The Wall Street Journal, Mr. Rader said the board is too quick to toss out patents that demonstrate only modest innovation. "The board needs to incentivize human progress--and understand that it often happens one small step at a time," he said.

But many company lawyers think the board is doing exactly as it should--taking a skeptical look at patents that have added little to the world.



For the full story, see:

ASHBY JONES. "New Weapon in Intellectual Property Wars; Panel Can Upend Patent Decisions, but Some Say It Goes Too Far; 'Like Getting CAT-Scanned, MRI-ed, and X-Rayed'." The Wall Street Journal (Tues., March 11, 2014): B4.

(Note: ellipsis between paragraphs, added; ellipsis inside paragraph, in original.)

(Note: the online version of the story has the date March 10, 2014, and has the title "A New Weapon in Corporate Patent Wars; Patent Trial and Appeal Board Can Upend PTO Decisions, but Some Say It Goes Too Far.")






April 8, 2014

Government Regulations Slow U.S. Use of Drones



DronesThreeSophisticatedCommerical2014-04-03.jpgThree sophisticated drones. From top to bottom, the Insitu ScanEagle, the Yamaha RMAX, and the Trimble UX5. Source and photo: online version of the WSJ article quoted and cited below.



(p. B1) After Greek land surveyor George Papastamos bought his first drones a year ago, he let go most of his workers. Now, instead of a team of 12, he shows up to work sites with just a drone and an assistant.

"I could see this was the future," said Mr. Papastamos, a second-generation surveyor from Athens. The drones have improved his maps and lowered his costs, enabling him to win more business. "It is much, much more profitable," he said.

As U.S. regulators and courts grapple with when and how to allow the use of drones for commercial purposes, flying robots already are starting to change the way companies do business in countries from Australia to Japan to the U.K. They are showing the potential to provide cheaper and more effective alternatives to manned aircraft--and human workers--in industries like mining, construction and filmmaking.

The U.S. is "the world leader in producing drones," but "the reality is the rest of the world has moved further ahead of us in terms of commercial applications," said drone researcher Missy Cummings, director of the Humans and Autonomy Lab at Duke University.



For the full story, see:

JACK NICAS. "From Farms to Films, Drones Find Commercial Uses." The Wall Street Journal (Tues., March 11, 2014): B1 & B6.

(Note: the online version of the story has the date March 10, 2014, and has the title "Drones Find Fans Among Farmers, Filmmakers; FAA Still Debating Rules but Drones are Spraying 40% of Japan's Rice Fields.")






April 7, 2014

William Vanderbilt Helped Disrupt His Gas Holdings by Investing in Edison's Electricity



(p. 84) But even the minimal ongoing work on the phonograph would be pushed aside by the launch of frenzied efforts to find a way to fulfill Edison's premature public claim that his electric light was working. A couple of months later, when asked in an interview about the state of his phonograph, Edison replied tartly, "Comatose for the time being." He changed metaphors and continued, catching hold of an image that would be quoted many times by later biographers: "It is a child and will grow to be a man yet; but I have a bigger thing in hand and must finish it to the temporary neglect of all phones and graphs."

Financial considerations played a part in allocation of time and resources, too. Commissions from the phonograph that brought in hundreds of dollars were hardly worth accounting for, not when William Vanderbilt and his friends were about to advance Edison $50,000 for the electric light. Edison wrote a correspondent that he regarded the financier's interest especially satisfying as Vanderbilt was "the largest gas stock owner in America."



Source:

Stross, Randall E. The Wizard of Menlo Park: How Thomas Alva Edison Invented the Modern World. New York: Crown Publishers, 2007.

(Note: ellipses, and capitals, in original.)






April 4, 2014

Gary Becker's Grandson Ponders Opportunity Cost of College



HarboeLouisYoungTechEntrepreneur2014-03-30.jpg



"Louis Harboe with his parents, Frederik Harboe and Catherine Becker. Louis, now 18, got his first freelance tech job at age 12. Last year, he attended the Apple Worldwide Developers Conference in San Francisco." Source of caption and photo: online version of the NYT article quoted and cited below.




(p. 1) Ryan was headed to South by Southwest Interactive, the technology conference in Austin. There, he planned to talk up an app that he and a friend had built. Called Finish, it aimed to help people stop procrastinating, and was just off its high in the No. 1 spot in the productivity category in the Apple App store.


. . .


Ryan is now 17, a senior at Boulder High. He is among the many entrepreneurially minded, technologically skilled teenagers who are striving to do serious business. Their work is enabled by low-cost or free tools to make apps or to design games, and they are encouraged by tech companies and grown-ups in the field who urge them, sometimes with financial support, to accelerate their transition into "the real world." This surge in youthful innovation and entrepreneurship looks "unprecedented," said Gary Becker, a University of Chicago economist and a Nobel laureate.

Dr. Becker is assessing this subject from a particularly intimate vantage point. His grandson, Louis Harboe, 18, is a friend of (p. 6) Ryan's, a technological teenager who makes Ryan look like a late bloomer. Louis, pronounced Louie, got his first freelance gig at the age of 12, designing the interface for an iPhone game. At 16, Louis, who lives with his parents in Chicago, took a summer design internship at Square, an online and mobile payment company in San Francisco, earning $1,000 a week plus a $1,000 housing stipend.

Ryan and Louis, who met online in the informal network of young developers, are hanging out this weekend in Austin at South by Southwest. They are also waiting to hear from the colleges to which they applied last fall -- part of the parallel universe they also live in, the traditional one with grades and SATs and teenage responsibilities. But unlike their peers for whom college is the singular focus, they have pondered whether to go at all. It's a good kind of problem, the kind faced by great high-school athletes or child actors who can try going pro, along with all the risk that entails.

Dr. Becker, who studies microeconomics and education, has been telling his grandson: "Go to college. Go to college." College, he says, is the clear step to economic success. "The evidence is overwhelming."

But the "do it now" idea, evangelized on a digital pulpit, can feel more immediate than academic empiricism. "College is not a prerequisite," said Jess Teutonico, who runs TEDxTeen, a version of the TED talks and conferences for youth, where Ryan spoke a few weeks ago. "These kids are motivated to take over the world," she said. "They need it fast. They need it now."



For the full story, see:

MATT RICHTEL. "The Youngest Technorati." The New York Times, SundayBusiness Section (Fri., MARCH 9, 2014): 1 & 6.

(Note: ellipsis added.)

(Note: the online version of the story has the date MARCH 8, 2014.)






April 3, 2014

As a Young Inventor, Edison Patented Fast



Edison filed patent applications as fast as the ideas arrived.


Source:

Stross, Randall E. The Wizard of Menlo Park: How Thomas Alva Edison Invented the Modern World. New York: Crown Publishers, 2007.






March 30, 2014

Edison Sold Half-Interest in Some Patents, to Fund His Inventing




Stross discusses Edison's inventing at age 21:


(p. 8) Edison soon sought investors who would provide funds in exchange for half-interest in resulting patents.


Source:

Stross, Randall E. The Wizard of Menlo Park: How Thomas Alva Edison Invented the Modern World. New York: Crown Publishers, 2007.






March 18, 2014

Nasaw Claims Carnegie Believed in Importance of Basic Scientific Research




But notice that the two main examples of what Carnegie himself chose to fund (the Wilson Observatory and the yacht to collect geophysical data), were empirically oriented, not theoretically oriented.


(p. 480) Carnegie was, as Harvard President James Bryant Conant would comment in 1935 on the centenary of his birth, "more than a generation ahead of most business men of this country [in understanding] the importance of science to industry." He recognized far better than his peers how vital basic scientific research was to the applied research that industry fed off. George Ellery Hale, an astronomer and astrophysicist, later to be the chief architect of the National Research Council, was astounded when he learned of Carnegie's commitment to pure research. "The provision of a large endowment solely for scientific research seemed almost too good to be true.... Knowing as I did the difficulties of obtaining money for this purpose and (p. 481) devoted as I was to research rather than teaching, I could appreciate some of the possibilities of such an endowment." Hale applied for funds to build an observatory on Mount Wilson in California, and got what he asked for. It would take until 1909 to build and install a 60-inch reflecting telescope in the observatory; in 1917, a second 100-inch telescope, the largest in the world, was added.

The Mount Wilson Observatory-- and the work of its astronomers and astrophysicists-- was only one of the projects funded in the early years of the new institution. Another, of which Carnegie was equally proud, was the outfitting of the Carnegie, an oceangoing yacht with auxiliary engine, built of wood and bronze so that it could collect geophysical data without the errors inflicted on compass readings by iron and steel. The ship was launched in 1909; by 1911, Carnegie could claim that the scientists on board had already been able to correct several significant errors on navigational maps.



Source:

Nasaw, David. Andrew Carnegie. New York: Penguin Press, 2006.

(Note: ellipsis, and italics, in original.)

(Note: the pagination of the hardback and paperback editions of Nasaw's book are the same.)






February 26, 2014

Carnegie's Not-Fully-Grown-Infant-Industry Argument for Steel Tariffs



(p. 375) The steel industry was doubly dependent on state and national governments for the generous loans and subsidies that fueled railway expansion and rail purchases and the protective tariffs that enabled the manufacturers to keep their prices--and profits--higher than would have been possible had they been compelled to compete with European steelmakers. If, in the beginning, as Carnegie had argued, the tariff had been needed to nurture an infant steel industry, by the mid-1880s that infant had become a strapping, abrasive youth, who kept on growing. Why then, one might inconveniently ask, was there need for a protective tariff? Because, as Carnegie argued in the North American Review in July 1890, the steel industry was not yet fully grown and would have to be protected until it was.

On the issue of the tariff--as on few others--Pittsburgh's workingmen were in agreement with Carnegie. They voted Republican in large numbers because the Republicans were the guardians of the protective tariff, and the tariff, they believed, protected their wage rates.

The argument linking the tariff and wages in the manufacturing sector was a compelling one in the industrial states, but nowhere else. As the Democrats took great delight in pointing out, high tariffs led to high prices for all consumers.



Source:

Nasaw, David. Andrew Carnegie. New York: Penguin Press, 2006.

(Note: italics in original.)

(Note: the pagination of the hardback and paperback editions of Nasaw's book are the same.)






February 21, 2014

Hero Rebels Against the Bureau of Technology Control



InfluxBK2014-02-19.jpg
















Source of book image: online version of the WSJ review quoted and cited below.



(p. D8) In "Influx," . . . , a sinister Bureau of Technology Control kidnaps scientists that have developed breakthrough technologies (the cure to cancer, immortality, true artificial intelligence), and is withholding their discoveries from humanity, out of concern over the massive social disruption they would cause. "We don't have a perfect record--Steve Jobs was a tricky one--but we've managed to catch most of the big disrupters before they've brought about uncontrolled social change," says the head of the bureau, the book's villain. The hero has developed a "gravity mirror" but refuses to cooperate, despite the best efforts of Alexa, who has been genetically engineered by the Bureau to be both impossibly sexy and brilliant.

In the publishing world, there is a growing sense that "Influx," Mr. Suarez's fourth novel, may be his breakout book and propel him into the void left by the deaths of Tom Clancy and Michael Crichton. "Influx' has Mr. Suarez's largest initial print run, 50,000 copies, and Twentieth Century Fox bought the movie rights last month.

An English major at the University of Delaware with a knack for computers, Mr. Suarez started a consulting firm in 1997, working with companies like Nestlé on complex production and logistics-planning issues. "You only want to move 100 million pounds of sugar once," says Mr. Suarez, 49 years old.

He began writing in his free-time. Rejected by 48 literary agents--(a database expert, he kept careful track)--he began self-publishing in 2006 under the name Leinad Zeraus, his named spelled backward. His sophisticated tech knowledge quickly attracted a cult following in Silicon Valley, Redmond, Wash., and Cambridge, Mass. The MIT bookstore was the first bookstore to stock his self-published books in 2007.



For the full review, see:

EBEN SHAPIRO. "Daniel Suarez Sees Into the Future." The Wall Street Journal (Fri., Feb. 7, 2014): D8.

(Note: ellipsis added.)

(Note: the online version of the review has the date Feb. 5, 2014, and the title "Daniel Suarez Sees Into the Future.")


The book under review, is:

Suarez, Daniel. Influx. New York: Dutton, 2014.



SuarezDanielAuthorInflux2014-02-19.jpg










Author of Influx, Daniel Suarez. Source of photo: online version of the WSJ article quoted and cited above.








February 20, 2014

The Young, with Managerial Experience, Are Most Likely to Become Entrepreneurs



(p. A13) In a current study analyzing the most recent Global Entrepreneurship Monitor (GEM) survey, my colleagues James Liang, Jackie Wang and I found that there is a strong correlation between youth and entrepreneurship. The GEM survey is an annual assessment of the "entrepreneurial activity, aspirations and attitudes" of thousands of individuals across 65 countries.

In our study of GEM data, which will be issued early next year, we found that young societies tend to generate more new businesses than older societies. Young people are more energetic and have many innovative ideas. But starting a successful business requires more than ideas. Business acumen is essential to the entrepreneur. Previous positions of responsibility in companies provide the skills needed to successfully start businesses, and young workers often do not hold those positions in aging societies, where managerial slots are clogged with older workers.

In earlier work (published in the Journal of Labor Economics, 2005), I found that Stanford MBAs who became entrepreneurs typically worked for others for five to 10 years before starting their own businesses. The GEM data reveal that in the U.S. the entrepreneurship rate peaks for individuals in their late 20s and stays high throughout the 30s. Those in their early 20s have new business ownership rates that are only two-thirds of peak rates. Those in their 50s start businesses at about half the rate of 30-year-olds.

Silicon Valley provides a case in point. Especially during the dot-com era, the Valley was filled with young people who had senior positions in startups. Some of the firms succeeded, but even those that failed provided their managers with valuable business lessons.

My co-author on the GEM study, James Liang, is an example. After spending his early years as a manager at the young and rapidly growing Oracle, he moved back to China to start Ctrip, one of the country's largest Internet travel sites.



For the full commentary, see:

EDWARD P. LAZEAR. "The Young, the Restless and Economic Growth; Countries with a younger population have far higher rates of entrepreneurship." The Wall Street Journal (Mon., Dec. 23, 2013): A13.

(Note: the online version of the commentary has the date Dec. 22, 2013.)


The Lazear paper mentioned above, is:

Lazear, Edward P. "Entrepreneurship." Journal of Labor Economics 23, no. 4 (October 2005): 649-80.






February 16, 2014

Incandesce



(p. A11) When I am asked if I want a Compact Fluorescent Light, the only thought I have is that I don't want my light to be compact, nor do I wish it to be florescent. I want a light that will incandesce across my room, filling it with a familiar yellow surf, and remind me that it was not with wax or kerosene, but with incandescent bulbs that man conquered the night.


. . .


I imagine what will happen when the filaments in my final incandescent bulbs grow weak, and I can hardly read my notes before me. Will I no longer be able to write at night? Or worse, will living with CFLs and LEDs make every day feel like I have just spent nine hours plastered before a computer screen? One day, soon, I will turn on my light and hear for the last time the signature, explosive death rattle of an incandescent bulb, and I'll hold a vigil for the light that shaped and witnessed more than a century of human history. Tender is the light, Keats might say.

In my lightless room, I'll sit for a moment and wonder how many more times in my life I'll watch a bulb go out again. As I look to my dead bulb, I'll think of the poet again and whisper: Darkling, you were not a piece of technology born for death.



For the full commentary, see:

ALEXANDER ACIMAN. "Tender Is the Light of My Incandescents; Bracing myself for life once the filaments in my beloved bulbs grow weak." The Wall Street Journal (Fri., Jan. 31, 2014): A11.

(Note: ellipsis added.)

(Note: the online version of the commentary has the date Jan. 30, 2014.)






February 12, 2014

It Does Not Take a Government to Raise a Railroad



(p. A17) . . . , All Aboard Florida (the train will get a new name this year), is not designed to push political buttons. It won't go to Tampa. It will zip past several aggrieved towns on Florida's Treasure Coast without stopping.

Nor will the train qualify as "high speed," except on a stretch where it will hit 125 miles an hour. Instead of running on a dedicated line, the new service will mostly share existing track with slower freight trains operated by its sister company, the Florida East Coast Railway.

But the sponsoring companies, all owned by the private-equity outfit Fortress Investment Group, appear to have done their sums. By minimizing stops, the line will be competitive with road and air in connecting the beaches, casinos and resorts of Miami and Fort Lauderdale with the big airport and theme-park destination of Orlando. Capturing a small percentage of the 50 million people who travel between these fleshpots, especially European visitors accustomed to intercity rail at home, would let the train cover its costs and then some.

But Fortress has a bigger fish in the pan. Its local operation, Florida East Coast Industries, is a lineal progeny of Henry Flagler, the 1890s entrepreneur who created modern Florida when he built a rail line to support his resort developments. Flagler's heirs are adopting the same model. A Grand Central-like complex will rise on the site of Miami's old train station. A similar but smaller edifice is planned for Fort Lauderdale.

The project is a vivid illustration of the factors that have to fall in place to make passenger rail viable nowadays. If the Florida venture succeeds, it would be the only intercity rail service anywhere in the world not dependent on government operating subsidies. It would be the first privately run intercity service in America since the birth of Amtrak in 1971.



For the full commentary, see:

HOLMAN W. JENKINS, JR. "BUSINESS WORLD; A Private Railroad Is Born; All Aboard Florida isn't looking for government operating subsidies." The Wall Street Journal (Weds., Jan. 15, 2014): A17.

(Note: ellipsis added.)

(Note: the online version of the commentary has the date Jan. 14, 2014.)






February 1, 2014

Twitter Founders Were Outsiders and Unafraid of Risk



HatchingTwitterBK2014-01-18.jpg











Source of the book image: http://s.wsj.net/public/resources/images/BN-AF602_bkrvtw_GV_20131031131314.jpg







(p. 20) . . . "Hatching Twitter," a fast-paced and perceptive new book by Nick Bilton, a columnist and reporter for The New York Times, establishes that uncertainty and dissension about its true purpose has characterized Twitter from its inception.


. . .


The company was financed by Williams, who made a bundle selling Blogger to Google and was intent on proving he wasn't a one-hit wonder. It rose from the ashes of a failed podcasting enterprise, Odeo, which Williams had bankrolled as a favor to his friend Noah Glass. Bilton sketches the founders' backgrounds and personalities in quick, skillful strokes that will serve the eventual screenwriter, director and storyboard artist well; these are characters made for the big screen.

None came from money. Ev Williams was a shy Nebraska farm boy whose parents never really understood their socially awkward, computer-obsessed son.


. . .


Having known hardship, none of the four founders were afraid of risk. To join the ill-fated Odeo, Stone walked away from a job at Google, leaving more than $2 million in unvested stock options on the table.

Twitter began with a conversation. Dorsey and Glass sat talking in a car one night in 2006 when Odeo was on the verge of collapse. Dorsey mentioned his "status concept," which was inspired by AOL's Instant Messenger "away messages" and LiveJournal status updates that people were using to mention where they were and what they were doing. Glass warmed to the idea, seeing it as a "technology that would erase a feeling that an entire generation felt while staring into their computer screens": loneliness.



For the full review, see:

MAUD NEWTON. "Four Characters." The New York Times Book Review (Sun., November 3, 2013): 20.

(Note: ellipses added.)

(Note: the online version of the review has the date November 1, 2013.)


Book under review:

Bilton, Nick. Hatching Twitter: A True Story of Money, Power, Friendship, and Betrayal. New York: Portfolio, 2013.






January 31, 2014

70 Percent of Current Jobs May Soon Be Done by Robots



Kelly may be right, but it does not imply that we will all be unemployed. What will happen is that new and better jobs, and entrepreneurial opportunities, will be created for humans.

Robots will do the boring, the dangerous, and the physically exhausting. We will do the creative and the analytic, and the social or emotional


(p. A21) Kevin Kelly set off a big debate with a piece in Wired called "Better Than Human: Why Robots Will -- And Must -- Take Our Jobs." He asserted that robots will soon be performing 70 percent of existing human jobs. They will do the driving, evaluate CAT scans, even write newspaper articles. We will all have our personal bot to get coffee. There's already an existing robot named Baxter, who is deliciously easy to train: "To train the bot you simply grab its arms and guide them in the correct motions and sequence. It's a kind of 'watch me do this' routine. Baxter learns the procedure and then repeats it. Any worker is capable of this show-and-tell."


For the full commentary, see:

DAVID BROOKS. "The Sidney Awards, Part 2." The New York Times (Tues., December 31, 2013): A21. [National Edition]

(Note: the online version of the commentary has the date December 30, 2013.)


The article praised by Brooks is:

Kelly, Kevin. "Better Than Human: Why Robots Will -- and Must -- Take Our Jobs." Wired (Jan. 2013).






January 24, 2014

Artificial Intelligence Is a Complement to Human Intelligence, Not a Substitute for It



Smarter-Than-You-ThinkBK.jpg














Source of book image: http://img2-1.timeinc.net/ew/i/2013/11/05/Smarter-Than-You-Think.jpg




(p. 11) Clive Thompson, a Brooklyn-based technology journalist, uses this tale to open "Smarter Than You Think," his judicious and insightful book on human and machine intelligence. But he takes it to a more interesting level. The year after his defeat by Deep Blue, Kasparov set out to see what would happen if he paired a machine and a human chess player in a collaboration. Like a centaur, the hybrid would have the strength of each of its components: the processing power of a large logic circuit and the intuition of a human brain's wetware. The result: human-machine teams, even when they didn't include the best grandmasters or most powerful computers, consistently beat teams composed solely of human grandmasters or superfast machines.

Thompson's point is that "artificial intelligence" -- defined as machines that can think on their own just like or better than humans -- is not yet (and may never be) as powerful as "intelligence amplification," the symbiotic smarts that occur when human cognition is augmented by a close interaction with computers.



For the full review, see:

WALTER ISAACSON. "Brain Gain." The New York Times Book Review (Sun., November 3, 2013): 11.

(Note: the online version of the review has the date November 1, 2013.)


Book under review:

Thompson, Clive. Smarter Than You Think: How Technology Is Changing Our Minds for the Better. New York: Penguin Press, 2013.






January 21, 2014

Carnegie Created "Plausible Fictions" on the Future Demand for Minor Railroads




Economists and historians continue to debate the importance or unimportance of railroads in the economic growth of the United States. This is a debate that I need to explore more.


(p. 129) It is doubtful that either [Scott or Carnegie] . . . truly believed that the new railroads, when built, would carry enough traffic to earn back their construction costs. A great number of them were along lightly traveled routes, which, like the Gilman, Springfield & Clinton Railroad in Illinois, connected small cities that did little business with one another. The roads were being built because money could be made building them. Carnegie profited from the commissions on the bond sales; Scott from diverting funds earmarked for construction into the hands of the select number of investors, himself included, who were directors of both the railroad and the improvement companies.

To raise money for roads not yet built and probably not really needed, Carnegie and Scott trafficked in what Richard White refers to as "the utilitarian fictions of capitalism." Together, they constructed "plausible fictions" about the railroads, the passengers and freight that would ride them, the tolls that would be collected, the villages that would grow into towns and the towns into cities, creating new populations, products, and commerce.

Carnegie, a consummate optimist, took naturally to the task.



Source:

Nasaw, David. Andrew Carnegie. New York: Penguin Press, 2006.

(Note: bracketed words and ellipsis added.)

(Note: the pagination of the hardback and paperback editions of Nasaw's book are the same.)






January 18, 2014

Patent Allows Mechanic to Profit from Invention to Ease Births



OdonDeviceEasesBirth2014-01-16.jpg "With Jorge Odón's device, a plastic bag inflated around a baby's head is used to pull it out of the birth canal." Source of caption and photo: online version of the NYT article quoted and cited below.


(p. A1) The idea came to Jorge Odón as he slept. Somehow, he said, his unconscious made the leap from a YouTube video he had just seen on extracting a lost cork from a wine bottle to the realization that the same parlor trick could save a baby stuck in the birth canal.

Mr. Odón, 59, an Argentine car mechanic, built his first prototype in his kitchen, using a glass jar for a womb, his daughter's doll for the trapped baby, and a fabric bag and sleeve sewn by his wife as his lifesaving device.


. . .


(p. A4) In a telephone interview from Argentina, Mr. Odón described the origins of his idea.

He tinkers at his garage, but his previous inventions were car parts. Seven years ago, he said, employees were imitating a video showing that a cork pushed into an empty bottle can be retrieved by inserting a plastic grocery bag, blowing until it surrounds the cork, and drawing it out.


. . .


With the help of a cousin, Mr. Odón met the chief of obstetrics at a major hospital in Buenos Aires. The chief had a friend at the W.H.O., who knew Dr. Merialdi, who, at a 2008 medical conference in Argentina, granted Mr. Odón 10 minutes during a coffee break.

The meeting instead lasted two hours. At the end, Dr. Merialdi declared the idea "fantastic" and arranged for testing at the Des Moines University simulation lab, which has mannequins more true-to-life than a doll and a jar.

Since then, Mr. Odón has continued to refine the device, patenting each change so he will eventually earn royalties on it.


. . .


Dr. Merialdi said he endorsed a modest profit motive because he had seen other lifesaving ideas languish for lack of it. He cited magnesium sulfate injections, which can prevent fatal eclampsia, and corticosteroids, which speed lung development in premature infants.

"But first, this problem needed someone like Jorge," he said. "An obstetrician would have tried to improve the forceps or the vacuum extractor, but obstructed labor needed a mechanic. And 10 years ago, this would not have been possible. Without YouTube, he never would have seen the video."



For the full story, see:

DONALD G. McNEIL Jr. "Promising Tool in Difficult Births: A Plastic Bag." The New York Times (Thurs., November 14, 2013): A1 & A4. [National Edition]

(Note: ellipses added.)

(Note: the online version of the story has the date November 13, 2013, and has the title "Car Mechanic Dreams Up a Tool to Ease Births.")






January 17, 2014

Carnegie Failed Twice Before Bessemer Success



(p. 101) [Carnegie] . . . organized his own company to secure the rights to the Dodd process for strengthening iron rails by coating them with steel facings. Thomson agreed to appropriate $20,000 of Pennsylvania Railroad funds to test the new technology.

On March 12, 1867, Thomson wrote to tell Carnegie that his Dodd-processed rails had failed their first test: "treatment under the hammer.... You may as well abandon the Patent--It will not do if this Rail is a sample." Three days later, Thomson wrote Carnegie again, this time marking his letter with a handwritten "Private" in the top left-hand corner and "a word to the wise" penned in just below. Carnegie had apparently asked Thomson for more time--and/or money--to continue his experiments. Thomson replied that the experiments his engineers had made had so "impaired my confidence in this process that I don't feel at liberty to increase our order for these Rails."

Instead of giving up, Carnegie pushed forward, hawking his new steel-faced iron rails to other railroad presidents, attempting to get a new contract with Thomson, and reorganizing the Freedom Iron Company in Lewistown, Pennsylvania, in which he was a major investor, into Freedom Iron and Steel. In the spring of 1867, he succeeded, despite Thomson's misgivings, in getting the approval to manufacture and deliver a second 500-ton batch of steel-faced rails. The new rails fared as poorly as the old ones. There would be no further contracts forthcoming from the Pennsylvania Railroad or any other railroad.

Carnegie tried to bluff his way through. When his contacts in England recommended that he purchase the American rights to a better process for facing iron rails with steel, this one invented by a Mr. Webb, Carnegie retooled his mill for the new process. He was fooled a second time. Not only was the Webb process as impractical as the Dodd, but there was, as there (p. 102) had been with the Dodd process, confusion as to who held the American patent rights. Within a year, the company Carnegie had organized to produce the new steel-faced rails was out of business.


. . .


These early failures did not deter him from investing in other start-up companies and technologies, but he would in future be a bit more careful before committing his capital. In March 1869, Tom Scott solicited his advice about investing in the rights to a new "Chrome Steel process." Carnegie replied that his "advice (which don't cost anything if of no value) would be to have nothing to do with this or any other great change in the manufacture of steel or iron.... I know at least six inventors who have the secret all are so anxiously awaiting.... That there is to be a great change in the manufacture of iron and steel some of these years is probable, but exactly what form it is to take no one knows. I would advise you to steer clear of the whole thing. One will win, but many lose and you and I not being practical men would very likely be among the more numerous class. At least we would wager at very long odds. There are many enterprises where we can go in even."



Source:

Nasaw, David. Andrew Carnegie. New York: Penguin Press, 2006.

(Note: bracketed name, ellipsis near start, and ellipsis between paragraphs added; ellipsis internal to other paragraphs, in original.)

(Note: the pagination of the hardback and paperback editions of Nasaw's book are the same.)






January 13, 2014

"Despising to Bury in the Ground Any of the Talents . . . Which Might Reach His Coffers"



(p. 97) . . . , Carnegie was concerned that he was overextended. From Dresden, in mid-November, he half jokingly apologized to his brother for placing his--and the family's--finances in jeopardy. "Your finances are reputed far from healthy," he had written Tom. "But how can they ever be otherwise? It was never intended. One of the firm, at least, was made to be forever head and ears in debt and to crowd full sail, despising to bury in the ground any of the talents (silver talents, I mean) which might reach his coffers, or to lie long under the suspicion of having at the bank even a moderate balance upon the right side of the ledger." Carnegie had fantasized that "a whole year's absence from opening up new enterprises... while the funds remained in charge of a super man, might possibly afford him, upon his return, a new sensation," that of being solvent. But that was not going to happen.


Source:

Nasaw, David. Andrew Carnegie. New York: Penguin Press, 2006.

(Note: ellipsis in title and at start added; ellipsis in Carnegie quote near end, in original.)

(Note: the pagination of the hardback and paperback editions of Nasaw's book are the same.)






January 12, 2014

In 20th Century, Inventions Had Cultural Impact Twice as Fast as in 19th Century



NgramGraphTechnologies2013-12-08.png I used Google's Ngram tool to generate the Ngram above, using the same technologies used in the Ngram that appeared in the print (but not the online) version of the article quoted and cited below. The blue line is "railroad"; the red line is "radio"; the green line is "television"; the orange line is "internet." The search was case-insensitive. The print (but not the online) version of the article quoted and cited below, includes a caption that describes the Ngram tool: "A Google tool, the Ngram Viewer, allows anyone to chart the use of words and phrases in millions of books back to the year 1500. By measuring historical shifts in language, the tool offers a quantitative approach to understanding human history."



(p. 3) Today, the Ngram Viewer contains words taken from about 7.5 million books, representing an estimated 6 percent of all books ever published. Academic researchers can tap into the data to conduct rigorous studies of linguistic shifts across decades or centuries. . . .

The system can also conduct quantitative checks on popular perceptions.

Consider our current notion that we live in a time when technology is evolving faster than ever. Mr. Aiden and Mr. Michel tested this belief by comparing the dates of invention of 147 technologies with the rates at which those innovations spread through English texts. They found that early 19th-century inventions, for instance, took 65 years to begin making a cultural impact, while turn-of-the-20th-century innovations took only 26 years. Their conclusion: the time it takes for society to learn about an invention has been shrinking by about 2.5 years every decade.

"You see it very quantitatively, going back centuries, the increasing speed with which technology is adopted," Mr. Aiden says.

Still, they caution armchair linguists that the Ngram Viewer is a scientific tool whose results can be misinterpreted.

Witness a simple two-gram query for "fax machine." Their book describes how the fax seems to pop up, "almost instantaneously, in the 1980s, soaring immediately to peak popularity." But the machine was actually invented in the 1840s, the book reports. Back then it was called the "telefax."

Certain concepts may persevere, even as the names for technologies change to suit the lexicon of their time.



For the full story, see:

NATASHA SINGER. "TECHNOPHORIA; In a Scoreboard of Words, a Cultural Guide." The New York Times, SundayBusiness Section (Sun., December 8, 2013): 3.

(Note: ellipsis added; bold in original.)

(Note: the online version of the article has the date December 7, 2013.)






January 9, 2014

Early Carnegie Profits "Were Quickly Reinvested in Other Projects"



(p. 78) The tens of thousands of dollars Carnegie earned in the four years he held the Columbia Oil stock were quickly reinvested in other projects.


Source:

Nasaw, David. Andrew Carnegie. New York: Penguin Press, 2006.

(Note: the pagination of the hardback and paperback editions of Nasaw's book are the same.)






January 1, 2014

"Carnegie Watched, Listened, Learned" from Scott's Process Innovations



(p. 65) Later in life, Scott would be better known for his political skills, but he was, like his mentor Thomson, a master of cost accounting. Together, the two men steadily cut unit costs and increased revenues by investing in capital improvements--new and larger locomotives, better braking systems, improved tracks, new bridges. Instead of running several smaller trains along the same route, they ran fewer but longer trains with larger locomotives and freight cars. To minimize delays--a major factor in escalating costs--they erected their own telegraph lines, built a second track and extended sidings alongside the first one, and kept roadways, tunnels, bridges, and crossings in good repair.

Carnegie watched, listened, learned. Nothing was lost on the young man. With an exceptional memory and a head for figures, he made the most of his apprenticeship and within a brief time was acting more as Scott's deputy than his assistant. Tom Scott had proven to be so good at his job that when Pennsylvania Railroad vice president William Foster died unexpectedly of an infected carbuncle, Scott was named his successor.



Source:

Nasaw, David. Andrew Carnegie. New York: Penguin Press, 2006.

(Note: the pagination of the hardback and paperback editions of Nasaw's book are the same.)






December 31, 2013

"Western Union Bullied the Makers of Public Policy into Serving Private Capital"



WesternUnionAndTheCreationOfTheAmericanCorporateOrderBK2013-12-28.jpg












Source of book image: online version of the WSJ review quoted and cited below.







(p. A13) Until now there has been no full-scale, modern company history. Joshua D. Wolff's "Western Union and the Creation of the American Corporate Order, 1845-1893" ably fills the bill, offering an exhaustive and yet fascinating account.


. . .


If people today remember anything about Western Union, it is that its coast-to-coast line put the Pony Express out of business and that its leaders didn't see the telephone coming. Mr. Wolff tells us that neither claim is exactly true. It was Hiram Sibley, Western Union's first president, who went out on his own, when his board balked, to form a separate company and build the transcontinental telegraph in 1861; he made his fortune by eventually selling it to Western Union. And the company was very aware of Alexander Graham Bell's invention, patented in 1876, but history had supposedly shown that it wasn't necessary to control a patent to win the technology war. The company's third president, William Orton, was sure that Bell and his "toy" would not get the better of Western Union: "We would come along and take it away from him." They didn't.


. . .


Mr. Wolff contends that the company's practices set the template for today's "corporate triumphalism," not least in the way Western Union bullied the makers of public policy into serving private capital. Perhaps, but telecom competition today is so ferocious and differently arranged from that of the late 19th century that a "triumphant" company today may be toast tomorrow--think of BlackBerry--and can't purchase help with anything like Western's Union's brazenness and scope. Western Union had friends in Congress, the regulatory bureaucracy and the press. Members of the company's board of directors chaired both the 1872 Republican and Democratic national conventions. It seemed that, whatever the battles in business, politics, technology or the courts, the company's shareholders won.



For the full review, see:

STUART FERGUSON. "Bookshelf; The Octopus of the Wires." The Wall Street Journal (Mon., Dec. 23, 2013): A13.

(Note: ellipses added.)

(Note: the online version of the review has the date Dec. 22, 2013, and has the title "BOOKSHELF; Book Review: 'Western Union and the Creation of the American Corporate Order, 1845-1893,' by Joshua D. Wolff.")


Book under review:

Wolff, Joshua D. Western Union and the Creation of the American Corporate Order, 1845-1893. New York: Cambridge University Press, 2013.






December 23, 2013

Over-Regulated Tech Entrepreneurs Seek Their Own Country



The embed above is provided by YouTube where the video clip is posted under the title "Balaji Srinivasan at Startup School 2013."




(p. B4) At a startup conference in the San Francisco Bay area last month, a brash and brilliant young entrepreneur named Balaji Srinivasan took the stage to lay out a case for Silicon Valley's independence.

According to Mr. Srinivasan, who co-founded a successful genetics startup and is now a popular lecturer at Stanford University, the tech industry is under siege from Wall Street, Washington and Hollywood, which he says he believes are harboring resentment toward Silicon Valley's efforts to usurp their cultural and economic power.

On its surface, Mr. Srinivasan's talk,—called "Silicon Valley's Ultimate Exit,"—sounded like a battle cry of the libertarian, anti-regulatory sensibility long espoused by some of the tech industry's leading thinkers. After arguing that the rest of the country wants to put a stop to the Valley's rise, Mr. Srinivasan floated a plan for techies to build an "opt-in society, outside the U.S., run by technology."

His idea seemed a more expansive version of Google Chief Executive Larry Page's call for setting aside "a piece of the world" to try out controversial new technologies, and investor Peter Thiel's "Seastead" movement, which aims to launch tech-utopian island nations.



For the full commentary, see:

FARHAD MANJOO. "HIGH DEFINITION; The Valley's Ugly Complex." The Wall Street Journal (Mon., Nov. 4, 2013): B4.

(Note: the online version of the commentary has the date Nov. 3, 2013, and has the title "HIGH DEFINITION; Silicon Valley Has an Arrogance Problem.")






December 20, 2013

After First "Debilitating" Federal Funding, Morse Funded Telegraph Privately



(p. 37) The first telegraph line had been completed . . . , in 1844, when Samuel F. B. Morse, with $30,000 in federal funding, connected Washington to Baltimore. Morse and his partners had expected to get funding to build additional lines from the federal government, but their experience securing their first $30,000 had been so debilitating that they gave up entirely on the public sector and turned to private capital to fund their new telegraph lines. Henry O'Rielly secured the franchise and agreed to raise the capital to string telegraph poles from east to west. His plan was to extend one line from Buffalo to Chicago, the other across the Alleghenies from Philadelphia through Pittsburgh, to St. Louis, and then north to Chicago, and south to New Orleans.

Although customers were scarce and the first telegraph lines were continually breaking (or being broken by bands of boys who took great joy in throwing stones at the glass insulators that glistened in the sunlight), O'Rielly and the handful of entrepreneurs who believed in the future of telegraphy raised sufficient capital to extend their lines mile by mile. By late 1846, they had also connected Boston to Washington, via New York City and Philadelphia; New York City to Buffalo, through Albany; and in late December, Philadelphia to Pittsburgh, via Lancaster and Harrisburg.



Source:

Nasaw, David. Andrew Carnegie. New York: Penguin Press, 2006.

(Note: ellipsis added.)

(Note: the pagination of the hardback and paperback editions of Nasaw's book are the same.)






December 5, 2013

Wind Power Increases Government Corruption



LaclairKathyDislikesWindTurbines2013-10-27.jpg "Kathy Laclair of Churubusco, N.Y., dislikes the noise from the wind turbine blades and says their shadows give her vertigo." Source of caption and photo: online version of the NYT article quoted and cited below.



(p. A1) Lured by state subsidies and buoyed by high oil prices, the wind industry has arrived in force in upstate New York, promising to bring jobs, tax revenue and cutting-edge energy to the long-struggling region. But in town after town, some residents say, the companies have delivered something else: an epidemic of corruption and intimidation, as they rush to acquire enough land to make the wind farms a reality.

"It really is renewable energy gone wrong," said the Franklin County district attorney, Derek P. Champagne, who began a criminal inquiry into the Burke Town Board last spring and was quickly inundated with complaints from all over the state about the (p. A16) wind companies.


. . .


. . . corruption is a major concern. In at least 12 counties, Mr. Champagne said, evidence has surfaced about possible conflicts of interest or improper influence.

In Prattsburgh, N.Y., a Finger Lakes community, the town supervisor cast the deciding vote allowing private land to be condemned to make way for a wind farm there, even after acknowledging that he had accepted real estate commissions on at least one land deal involving the farm's developer.

A town official in Bellmont, near Burke, took a job with a wind company after helping shepherd through a zoning law to permit and regulate the towers, according to local residents. And in Brandon, N.Y., nearby, the town supervisor told Mr. Champagne that after a meeting during which he proposed a moratorium on wind towers, he had been invited to pick up a gift from the back seat of a wind company representative's car.

When the supervisor, Michael R. Lawrence, looked inside, according to his complaint to Mr. Champagne, he saw two company polo shirts and a leather pouch that he suspected contained cash.

When Mr. Lawrence asked whether the pouch was part of the gift, the representative replied, "That's up to you," according to the complaint.



For the full story, see:

NICHOLAS CONFESSORE. "In Rural New York, Windmills Can Bring Whiff of Corruption." The New York Times (Mon., August 18, 2008): A1 & A16.

(Note: ellipses added.)

(Note: the online version of the article has the date August 17, 2008.)



NoWindTurbinesSign2013-10-27.jpg









"To some upstate towns, wind power promises prosperity. Others fear noise, spoiled views and the corrupting of local officials." Source of caption and photo: online version of the NYT article quoted and cited above.






December 3, 2013

Amazon's Story of the Evolution and Revolution of Disruptive Innovation



EverythingStoreBK2013-10-29.jpg

















Source of book image:
http://i1.wp.com/allthingsd.com/files/2013/10/Stone_EverythingStore1.jpg



(p. C5) Mr. Stone, a senior writer for Bloomberg Businessweek and a former reporter for The New York Times, tells this story of disruptive innovation with authority and verve, and lots of well-informed reporting. Although "The Everything Store" retraces early ground covered by Robert Spector's 2000 book, "Amazon.com: Get Big Fast," Mr. Stone has conducted more than 300 interviews with current and former Amazon executives and employees, including conversations, over the years, with Mr. Bezos, who "in the end was supportive of this project even though he judged that it was 'too early' for a reflective look" at the company.

"The Everything Store" does not examine in detail the fallout that Amazon's rise has had on book publishing and on independent bookstores, but Mr. Stone does a nimble job of situating the company's evolution within the wider retail landscape and within the technological revolution that was remaking the world at the turn of the millennium.



For the full review, see:

MICHIKO KAKUTANI. "BOOKS OF THE TIMES; Selling as Hard as He Can." The New York Times (Tues., October 29, 2013.): C1 & C5.

(Note: the online version of the review has the date October 28, 2013.)


The book under review is:

Stone, Brad. The Everything Store: Jeff Bezos and the Age of Amazon. New York: Little, Brown and Company, 2013.


StoneBrad2013-10-29.jpg










"Brad Stone" Source of caption and photo: online version of the NYT review quoted and cited above.







December 1, 2013

Kits Let Model T Owners Transform Them into Tractors, Snowmobiles, Roadsters and Trucks



ModelTtractorConversion2013-10-25.jpg "OFF ROAD; Kits to take the Model T places Henry Ford never intended included tractor conversions, . . . " Source of caption and photo: online version of the NYT article quoted and cited below.



(p. 1) WHEN Henry Ford started to manufacture his groundbreaking Model T on Sept. 27, 1908, he probably never imagined that the spindly little car would remain in production for 19 years. Nor could Ford have foreseen that his company would eventually build more than 15 million Tin Lizzies, making him a billionaire while putting the world on wheels.

But nearly as significant as the Model T's ubiquity was its knack for performing tasks far beyond basic transportation. As quickly as customers left the dealers' lot, they began transforming their Ts to suit their specialized needs, assisted by scores of new companies that sprang up to cater exclusively to the world's most popular car.

Following the Model T's skyrocketing success came mail-order catalogs and magazine advertisements filled with parts and kits to turn the humble Fords into farm tractors, mobile sawmills, snowmobiles, racy roadsters and even semi-trucks. Indeed, historians credit the Model T -- which Ford first advertised as The Universal Car -- with launching today's multibillion-dollar automotive aftermarket industry.



For the full story, see:

LINDSAY BROOKE. "Mr. Ford's T: Mobility With Versatility." The New York Times, Automobiles Section (Sun., July 20, 2008): 1 & 14.

(Note: the online version of the story has the title "Mr. Ford's T: Versatile Mobility.")






November 29, 2013

Kerosene Creatively Destroyed Whale Oil



WhaleOilLamps2013-10-25.jpg "The whale-oil lamps at the Sag Harbor Whaling and Historical Museum are obsolete, though at one time, whale oil lighted much of the Western world." Source of caption and photo: online version of the NYT article quoted and cited below.



(p. 20) Like oil, particularly in its early days, whaling spawned dazzling fortunes, depending on the brute labor of tens of thousands of men doing dirty, sweaty, dangerous work. Like oil, it began with the prizes closest to home and then found itself exploring every corner of the globe. And like oil, whaling at its peak seemed impregnable, its product so far superior to its trifling rivals, like smelly lard oil or volatile camphene, that whaling interests mocked their competitors.

"Great noise is made by many of the newspapers and thousands of the traders in the country about lard oil, chemical oil, camphene oil, and a half-dozen other luminous humbugs," The Nantucket Inquirer snorted derisively in 1843. It went on: "But let not our envious and -- in view of the lard oil mania -- we had well nigh said, hog-gish opponents, indulge themselves in any such dreams."

But, in fact, whaling was already just about done, said Eric Jay Dolin, who . . . is the author of "Leviathan: The History of Whaling in America." Whales near North America were becoming scarce, and the birth of the American petroleum industry in 1859 in Titusville, Pa., allowed kerosene to supplant whale oil before the electric light replaced both of them and oil found other uses.


. . .


Mr. Dolin said the message for today was that one era's irreplaceable energy source could be the next one's relic. Like whaling, he said, big oil is ripe to be replaced by something newer, cleaner, more appropriate for its moment.



For the full story, see:

PETER APPLEBOME. "OUR TOWNS; Once They Thought Whale Oil Was Indispensable, Too." The New York Times, First Section (Sun., August 3, 2008): 20.

(Note: ellipses added.)

(Note: the online version of the story has the title, "OUR TOWNS; They Used to Say Whale Oil Was Indispensable, Too.")


Dolin's book is:

Dolin, Eric Jay. Leviathan: The History of Whaling in America. New York: W. W. Norton & Company, Inc., 2007.






November 20, 2013

Companies Do Less R&D in Countries that Steal Intellectual Property




The conclusions of Gupta and Wang, quoted below, are consistent with research done many years ago by economist Edwin Mansfield.


(p. A15) China's indigenous innovation program, launched in 2006, has alarmed the world's technology giants more than any other policy measure since the start of economic reforms in 1978. A recent report from the U.S. Chamber of Commerce even went so far as to call this program "a blueprint for technology theft on a scale the world has not seen before."


. . .


A comparison with India is illustrative. India has no equivalent to indigenous innovation rules. The government also is content to allow companies to set up R&D facilities without any rules about sharing technology with local partners or the like.

These policy differences appear to have a significant influence on corporate behavior. Consider the top 10 U.S.-based technology giants that received the most patents from the U.S. Patent and Trademark Office (USPTO) between 2006 and 2010: IBM, Microsoft, Intel, Hewlett-Packard, Micron, GE, Cisco, Texas Instruments, Broadcom and Honeywell.

Half of these companies appear not to be doing any significant R&D work in China. Between 2006 and 2010, the U.S. PTO did not award a single patent to any China-based units of five out of the 10 companies. In contrast, only one of the 10 did not receive a patent for an innovation developed in India.



For the full commentary, see:

Anil K. Gupta and Haiyan Wang. "How Beijing Is Stifling Chinese Innovation." The Wall Street Journal (Thurs., September 1, 2011): A15.

(Note: ellipsis added.)

(Note: the online version of the commentary has the title "Beijing Is Stifling Chinese Innovation.")


Mansfield's relevant paper is:

Mansfield, Edwin. "Unauthorized Use of Intellectual Property: Effects on Investment, Technology Transfer, and Innovation." In Global Dimensions of Intellectual Property Rights in Science and Technology, edited by M. E. Mogee M. B. Wallerstein, and R. A. Schoen. Washington, D.C.: National Academy Press, 1993, pp. 107-45.


Mansfield's research on this issue is discussed on pp. 1611-1612 of:

Diamond, Arthur M., Jr. "Edwin Mansfield's Contributions to the Economics of Technology." Research Policy 32, no. 9 (Oct. 2003): 1607-17.






November 10, 2013

If Feds Stalled Skype Deal, Google Would Have Been "Stuck with a Piece of Shit"




Even just the plausible possibility of a government veto of an acquisition, can stop the acquisition from happening. The feds thereby kill efficiency and innovation enhancing reconfigurations of assets and business units.


(p. 234) . . . , an opportunity arose that Google's leaders felt compelled to consider: Skype was available. It was a onetime chance to grab hundreds of millions of Internet voice customers, merging them with Google Voice to create an instant powerhouse. Wesley Chan believed that this was a bad move. Skype relied on a technology called peer to peer, which moved information cheaply and quickly through a decentralized network that emerged through the connections of users. But Google didn't need that system because it had its own efficient infrastruc-(p. 235)ture. In addition, there was a question whether eBay, the owner of Skype, had claim to all the patents to the underlying technology, so it was unclear what rights Google would have as it tried to embellish and improve the peer-to-peer protocols. Finally, before Google could take possession, the U.S. government might stall the deal for months, maybe even two years, before approving it. "We would have paid all this money, but the value would go away and then we'd be stuck with a piece of shit," says Chan.


Source:

Levy, Steven. In the Plex: How Google Thinks, Works, and Shapes Our Lives. New York: Simon & Schuster, 2011.

(Note: ellipsis added.)






November 4, 2013

Better Batteries Would Be a General Purpose Technology (GPT)




Economists of technology have been thinking about General Purpose Technologies (GPT) for the last 10 years or so. As the name implies, a GPT is one where there are broad applications, and new applications are invented as the price of the GPT declines. My plausible guess is that a breakthrough in battery technology would be a very important GPT. The progress sketched below is probably not a breakthrough, but progress is good.


(p. C4) People take batteries for granted, but they shouldn't. All kinds of technological advances hinge on developing smaller and more powerful mobile energy sources.

Researchers at Harvard University and the University of Illinois are reporting just such a creation, one that happens to be no bigger than a grain of sand. These tiny but powerful lithium-ion batteries raise the prospect of a new generation of medical and other devices that can go where traditional hulking batteries can't.


. . .


Jennifer Lewis, a materials scientist at Harvard, says these batteries can store more energy because 3-D printing enables the stacking of electrodes in greater volume than the thin-film methods now used to make microbatteries.



For the full story, see:

DANIEL AKST. "R AND D: Batteries on the Head of a Pin." The Wall Street Journal (Sat., June 22, 2013): C4.

(Note: ellipsis added.)

(Note: the online version of the interview has the date June 21, 2013.)







November 2, 2013

Google Used Auction Model to Allocate Internal Resources



(p. 202) Google's chief economist, Hal Varian, would later explain how it worked when new data centers open: "We'll build a nice new data center and say, 'Hey, Google Docs, would you move your machines over here?' And they say, 'Sure, next month.' Because nobody wants to go through the disruption of shifting. So I suggested we run an auction similar to what airlines do when they oversell a plane-- they keep offering bigger vouchers until enough customers are willing to give up their seats. In our case, we offer more machines in exchange for moving. One group might do it for fifty new ones, another for a hundred, and another won't move unless we give them three hundred. So we give them to the lowest bidder-- they get their extra capacity, and we get computation shifted to the new data center."

Google eventually devised an elaborate auction model for divvying up existing resources. In a paper entitled "Using a Market Economy to Provision Computer Resources Across Planet-wide Clusters," a group of Google engineers, along with a Stanford professor of management science and engineering, reported a project that essentially made Google's
computational resources into a silicon Wall Street. Supply and demand worked here not to fix stock prices but to place a value on resources. The system not only allowed projects at Google to get fair access to storage and computational cycles but identified shortages in computers, storage, and bandwidth. Instead of the Vickery auction used by AdWords, the system used an "ascending clock auction." At the beginning, the current price of each resource would be displayed, and Google engineers in competing projects could claim them at that price. The ideal outcome would ensure sufficient resources for everyone, in which case the auction stopped. Otherwise, the automated auctioneer would raise the prices for the next "time slot," and (p. 203) remaining competitors for those resources had to decide whether to bid higher. And so on, until the engineers not willing to stake their budgets on the most contested resources dropped out. "Hence," write the paper's authors, "the auction allows users to 'discover' prices in which all users pay/ receive payment in proportion to uniform resource prices."



Source:

Levy, Steven. In the Plex: How Google Thinks, Works, and Shapes Our Lives. New York: Simon & Schuster, 2011.






October 29, 2013

Google Had the Most "Massive Parallelized Redundant Computer Network" in the World



(p. 198) . . . by perfecting its software, owning its own fiber, and innovating in conservation techniques, Google was able to run its computers spending only a third of what its competitors paid. "Our true advantage was actually the fact that we had this massive parallelized redundant computer network, probably more than anyone in the world, including governments," says Jim Reese. "And we realized that maybe it's not in our best interests to let our competitors know."


Source:

Levy, Steven. In the Plex: How Google Thinks, Works, and Shapes Our Lives. New York: Simon & Schuster, 2011.

(Note: ellipsis added.)






October 27, 2013

Silicon Valley Is Open to Creative Destruction, But Tired of Taxes



(p. A15) Rancho Palos Verdes, Calif.

When the howls of creative destruction blew through the auto and steel industries, their executives lobbied Washington for bailouts and tariffs. For now, Silicon Valley remains optimistic enough that its executives don't mind having their own businesses creatively destroyed by newer technologies and smarter innovations. That's an encouraging lesson from this newspaper's recent All Things Digital conference, which each year attracts hundreds of technology leaders and investors.


. . .


In a 90-minute grilling by the Journal's Walt Mossberg and Kara Swisher, Apple Chief Executive Tim Cook assured the audience that his company has "some incredible plans that we've been working on for a while."

Mr. Cook's sunny outlook was clouded only by his dealings with Washington. He was recently the main witness at hearings called by Sen. Carl Levin, a Michigan Democrat, who accused Apple of violating tax laws. In fact, Apple's use of foreign subsidiaries is entirely legal--and Apple is the largest taxpayer in the U.S., contributing $6 billion a year to the government's coffers.

Mr. Cook put on a brave face about the hearings, saying, "I thought it was very important to go tell our side of the story and to view that as an opportunity instead of a pain in the [expletive]." Mr. Cook's foul language was understandable. "Just gut the [tax] code," he told the conference. "It's 7,500 pages long. . . . Apple's tax return is two feet high. It's crazy."

When the audience applauded, Ms. Swisher quipped, "All right, Rand Paul." A woman shouted: "No, I'm a Democrat!" One reason the technology industry remains the center of innovation may be that many technologists of all parties view trips to Washington as a pain.



For the full commentary, see:

L. GORDON CROVITZ. "INFORMATION AGE; Techies Cheer Creative Destruction." The Wall Street Journal (Mon., June 3, 2013): A15.

(Note: ellipsis between paragraphs added; italics in original; ellipsis, and bracketed words, within next-to-last paragraph, in original.)

(Note: the online version of the commentary has the date June 2, 2013.)






October 25, 2013

Larry Page: "At His Core He Cares about Latency"



(p. 184) Speed had always been an obsession at Google, especially for Larry Page. It was almost instinctual for him. "He's always measuring everything," says early Googler Megan Smith. "At his core he cares about latency." More accurately, he despises latency and is always trying to remove it, like Lady Macbeth washing guilt from her hands. Once Smith was walking down the street with him in Morocco and he suddenly dragged her into a random Internet café with maybe three machines. Immediately, he began timing how long it took web pages to load into a browser there.

Whether due to pathological impatience or a dead-on conviction that speed is chronically underestimated as a factor in successful products, Page had been insisting on faster delivery for everything Google from the beginning. The minimalism of Google's home page, allowing for lightning-quick (p. 185) loading, was the classic example. But early Google also innovated by storing cached versions of web pages on its own servers, for redundancy and speed.

"Speed is a feature," says Urs Hölzle. "Speed can drive usage as much as having bells and whistles on your product. People really underappreciate it. Larry is very much on that line."




Source:

Levy, Steven. In the Plex: How Google Thinks, Works, and Shapes Our Lives. New York: Simon & Schuster, 2011.






October 22, 2013

Dohrmann and Quevedo Survive Creative Destruction of Inacom



DohrmannHokampQuevedoCosentry2013-10-07.jpg "Cosentry, an Omaha-based provider of data center storage and managed technology services, has a new CEO, Brad Hokamp, center. With him at the Cosentry data center in Papillion are company founders Kevin Dohrmann, left, and Manny Quevedo." Source of caption and photo: online version of the Omaha World-Herald article quoted and cited below.


Innovation through creative destruction brings us the new products and processes that make our lives longer, richer and more satisfying. The major downside of creative destruction is the job loss of those working for firms that are creatively destroyed. Sometimes, in class, I use Omaha's Inacom as a concrete example. Inacom was a value-added retailer of computer equipment. They would buy PCs from IBM, Compaq and the like, then add software and hardware, and re-sell and install for firms, at a mark-up. They were creatively destroyed by Dell's process innovation of customizing and selling direct, at much lower prices than Inacom charged. When I arrived in Omaha, Inacom was one of a handful of Fortune 500 firms. Now Inacom is gone. But just because a firm is creatively destroyed does not imply that all those who worked for the firm are creatively destroyed. Dohrmann and Quevedo were executives at Inacom. They had the skills, knowledge, resilience and work ethic to create their own entrepreneurial startup that has thrived. Not everyone can do what Dohrmann and Quevedo did. But everyone should be able to improve their skills, knowledge, resilience, and work ethic, so that if creative destruction destroys the firm that employs them, they will still survive and possibly thrive.


(p. 1D) Cosentry's regional data center footprint has grown far from its "humble beginnings" 12 years ago of just 4,000 square feet in the old Southroads Mall in Bellevue.

"Everyone saw it as a mall that was in deterioration, and I walked in and saw the most beautiful building in Omaha," co-founder Manny Quevedo said, (p. 3D) remembering solid walls and below-grade space for computer systems.

Investments from Omaha firms Waitt Co. and McCarthy Capital along the way helped the firm grow; it was sold in 2011 to Boston private equity firm TA Associates but still has its headquarters at 127th Street and West Dodge Road.


. . .


The company's workforce has approximately doubled in the last five years to nearly 200, more than half of them in Nebraska, and will continue to grow gradually with the expansion as Cosentry hires more engineers and technicians, Quevedo said.

Today the company has six data centers, including two each in the Kansas City and Sioux Falls, S.D., metropolitan areas. If you use utilities or health care services or do any shopping or banking in the region, there's a chance some of your information has been stored or processed through Cosentry's servers.

Cosentry started with what Quevedo said was a handful of clients and grew to hundreds within its first five years.


. . .


(p. 3D) Cosentry Timeline

2001: With investment from Waitt Co., Cosentry is started by Manny Quevedo and Kevin Dohrmann, former employees of InaCom, the former Omaha Fortune 500 computer dealer that began as a division of Valmont Industries but merged with VanStar of Atlanta in 2000 and later declared bankruptcy. Cosentry creates a data center in Bellevue.

2005: Cosentry, also called IPR Inc., sold its IP Revolution division to a Kansas firm, Choice Solutions. IP Revolution sold voice and data communications services and systems. Cosentry doubles the size of its Bellevue data center and expands to the Kansas City and Sioux Falls, S.D., markets.

2008: Omaha investment firm McCarthy Capital invests in the firm. At the time, Cosentry had 95 employees.

2010: Cosentry cuts the ribbon on the $26 million Midlands Data Center in Papillion, a joint project with Alegent Health, which uses the center to store electronic medical records.

2011: Boston investment firm TA Associates buys Cosentry for an undisclosed amount from McCarthy and Waitt. The local management team continues to operate and have an ownership stake in Cosentry. The firm expands with second data centers in both the Sioux Falls and Kansas City markets.

2013: Cosentry refinances its credit facilities to provide up to $100 million to enable expansion, including the expansion of the Midlands Data Center. Today, Cosentry has nearly 200 employees and six data centers in three metropolitan areas.



For the full story, see:

Barbara Soderlin. "A Growing Tech Footprint: As Businesses' Data Storage Needs Expand, Cosentry Adds to Its Papillion Center." Omaha World-Herald (MONDAY, AUGUST 26, 2013): 1D & 3D.

(Note: ellipses added; bold in original print version of article.)

(Note: the online version of the article has the title "As Businesses' Data Storage Needs Expand, Cosentry Adds to Its Papillion Center.")




CosentryScottCappsAtPapillionDataCenterCoolingSystem2013-10-07.jpg






"Scott Capps of Cosentry's Papillion data center with the cooling system that helped Cosentry earn an Energy Star certification, which is given by the Environmental Protection Agency based on energy efficiency and lower emissions. It's the only data center in Nebraska with the certification." Source of caption and photo: the archive online version of the Omaha World-Herald article quoted and cited above.






October 21, 2013

Google's Redundant, Fault-Tolerant System Worked with Cheap, Low-Quality, Failure-Prone Equipment



(p. 183) Google was a tough client for Exodus; no company had ever jammed so many servers into so small an area. The typical practice was to put between five and ten servers on a rack; Google managed to get eighty servers on each of its racks. The racks were so closely arranged that it was difficult for a human being to squeeze into the aisle between them. To get an extra rack in, Google had to get Exodus to temporarily remove the side wall of the cage. "The data centers had never worried about how much power and AC went into each cage, because it was never close to being maxed out," says Reese. "Well, we completely maxed out. It was on an order of magnitude of a small suburban neighborhood," Reese says. Exodus had to scramble to install heavier circuitry. Its air-conditioning was also overwhelmed, and the colo bought a portable AC truck. They drove the eighteen-wheeler up to the colo, punched three holes in the wall, and pumped cold air into Google's cage through PVC pipes.


. . .


The key to Google's efficiency was buying low-quality equipment dirt cheap and applying brainpower to work around the inevitably high failure rate. It was an outgrowth of Google's earliest days, when Page and Brin had built a server housed by Lego blocks. "Larry and Sergey proposed that we design and build our own servers as cheaply as we can-- massive numbers of servers connected to a high-speed network," says Reese. The conventional wisdom was that an equipment failure should be regarded as, well, a failure. Generally the server failure rate was between 4 and 10 percent. To keep the failures at the lower end of the range, technology companies paid for high-end equipment from Sun Microsystems or EMC. "Our idea was completely opposite," says Reese. "We're going to build hundreds and thousands of cheap servers knowing from the get-go that a certain percentage, maybe 10 percent, are going to fail," says Reese. Google's first CIO, Douglas Merrill, once noted that the disk drives Google purchased were "poorer quality than you would put into your kid's computer at home."

(p. 184) But Google designed around the flaws. "We built capabilities into the software, the hardware, and the network--network-- the way we hook them up, the load balancing, and so on-- to build in redundancy, to make the system fault-tolerant," says Reese. The Google File System, written by Jeff Dean and Sanjay Ghemawat, was invaluable in this process: it was designed to manage failure by "sharding" data, distributing it to multiple servers. If Google search called for certain information at one server and didn't get a reply after a couple of milliseconds, there were two other Google servers that could fulfill the request.



Source:

Levy, Steven. In the Plex: How Google Thinks, Works, and Shapes Our Lives. New York: Simon & Schuster, 2011.

(Note: ellipsis added.)






October 17, 2013

Gates Did Not See that Gmail's 2-Gig Storage Would Beat Hotmail



(p. 179) About six months after Gmail came out, Bill Gates visited me at Newsweek's New York headquarters to talk about spam. (His message was that within a year it would no longer be a problem. Not exactly a Nostradamus moment.) We met in my editor's office. The question came up whether free email accounts should be supported by advertising. Gates felt that users were more negative than positive on the issue, but if people wanted it, Microsoft would offer it.

"Have you played with Gmail?" I asked him.

"Oh sure, I play with everything," he replied. "I play with A-Mail, B-Mail, C-Mail, I play with all of them."

My editor and I explained that the IT department at Newsweek gave us barely enough storage to hold a few days' mail, and we both forwarded everything to Gmail so we wouldn't have to spend our time deciding what to delete. Only a few months after starting this, both of us had consumed more than half of Gmail's 2-gigabyte free storage space. (Google had already doubled the storage from one gig to two.)

Gates looked stunned, as if this offended him. "How could you need more than a gig?" he asked. "What've you got in there? Movies? PowerPoint presentations?"

No, just lots of mail.

He began firing questions. "How many messages are there?" he demanded. "Seriously, I'm trying to understand whether it's the number of messages or the size of messages." After doing the math in his head, he came to the conclusion that Google was doing something wrong.

The episode is telling. Gates's implicit criticism of Gmail was that it was wasteful in its means of storing each email. Despite his currency with cutting-edge technologies, his mentality was anchored in the old paradigm of storage being a commodity that must be conserved. He had written his first programs under a brutal imperative for brevity. And Microsoft's web-based email service reflected that parsimony.

The young people at Google had no such mental barriers. From the moment their company started, they were thinking in terms of huge numbers. Remember, they named their company after a 100-digit number! Moore's Law was as much a fact as air for them, so they understood that the expense of the seemingly astounding 2 gigabytes they gave away in 2004 would be negligible only months later. It would take some months for Gates's minions to catch up and for Microsoft's Hotmail to dramatically increase storage. (Yahoo Mail also followed suit.)

"That was part of my justification for doing Gmail," says Paul Buchheit of its ability to make use of Google's capacious servers for its storage. "When people said that it should be canceled, I told them it's really the foundation for a lot of other products. It just seemed obvious that the way things were going, all information was going to be online."



Source:

Levy, Steven. In the Plex: How Google Thinks, Works, and Shapes Our Lives. New York: Simon & Schuster, 2011.

(Note: italics in original.)






October 9, 2013

Rising Google Stock Prices Led Googlers to Be Wary of Innovation



(p. 156) . . . Googlers were affected by stock ownership. (They were, after all, human.) Bo Cowgill, a Google statistician, did a series of studies of his colleagues' behavior, based on their participation in a "prediction market," a setup that allowed them to make bets on the success of internal projects. He discovered that "daily stock price movements affect the mood, effort level and decision-making of employees." As you'd expect, increases in stock performance made people happier and more optimistic-- but they also led them to regard innovative ideas more warily, indicating that as Googlers became richer, they became more conservative. That was exactly the downside of the IPO that the founders had dreaded.


Source:

Levy, Steven. In the Plex: How Google Thinks, Works, and Shapes Our Lives. New York: Simon & Schuster, 2011.

(Note: ellipsis added; italics in original.)






October 5, 2013

"SEC Rules Demanded Complexity"



(p. 152) Google had considerable experience with pleasing users, but in the case of the auction, it could not create a simple interface. SEC rules demanded complexity. So the Google auction was a lot more complicated than buying Pokémon cards on eBay. People had to qualify financially as bidders. Bids had to be placed by a brokerage. If you made an error in reg-(p. 153)istering, you could not correct it but had to reregister. All those problems led to a few postponements of the start of the bidding period.

But the deeper problem was the uncertainty of Google's prospects. As the press accounts accumulated--with reporters informed by Wall Streeters eager to sabotage the process-- the perception grew that Google was a company with an unfamiliar business model run by weird people. A typical Wall Street insider analysis was reflected by Forbes.com columnist Scott Reeves, who concluded that Google's target price, at the time pegged to the range between $ 108 and $ 135 a share, was excessive. "Only those who were dropped on their head at birth [will] plunk down that kind of cash for an IPO," Reeves wrote.



Source:

Levy, Steven. In the Plex: How Google Thinks, Works, and Shapes Our Lives. New York: Simon & Schuster, 2011.






September 24, 2013

Nanny Feds Take Revenge on Zucker for Trying to "Save Our Balls"



ZuckerCraigBuckyballsEntrepreneur2013-08-31.jpg











Craig Zucker. Source of caricature: online version of the WSJ article quoted and cited below.



(p. A11) Mr. Zucker is the former CEO of Maxfield & Oberton, the small company behind Buckyballs, an office toy that became an Internet sensation in 2009 and went on to sell millions of units before it was banned by the feds last year.

A self-described "serial entrepreneur," Mr. Zucker looks the part with tussled black hair, a scraggly beard and hipster jeans. Yet his casual-Friday outfit does little to subdue his air of ambition and hustle.

Nowadays Mr. Zucker spends most of his waking hours fighting off a vindictive U.S. Consumer Product Safety Commission that has set out to punish him for having challenged its regulatory overreach. The outcome of the battle has ramifications far beyond a magnetic toy designed for bored office workers. It implicates bedrock American notions of consumer choice, personal responsibility and limited liability.


. . .


In August 2009, Maxfield & Oberton demonstrated Buckyballs at the New York Gift Show; 600 stores signed up to sell the product. By 2010, the company had built a distribution network of 1,500 stores, including major retailers like Urban Outfitters and Brookstone. People magazine in 2011 named Buckyballs one of the five hottest trends of the year, and in 2012 it made the cover of Brookstone's catalog.

Maxfield & Oberton now had 10 employees, 150 sales representatives and a distribution network of 5,000 stores. Sales had reached $10 million a year. "Then," says Mr. Zucker, "we crashed."

On July 10, 2012, the Consumer Product Safety Commission instructed Maxfield & Oberton to file a "corrective-action plan" within two weeks or face an administrative suit related to Buckyballs' alleged safety defects. Around the same time--and before Maxfield & Oberton had a chance to tell its side of the story--the commission sent letters to some of Maxfield & Oberton's retail partners, including Brookstone, warning of the "severity of the risk of injury and death possibly posed by" Buckyballs and requesting them to "voluntarily stop selling" the product.

It was an underhanded move, as Maxfield & Oberton and its lawyers saw it. "Very, very quickly those 5,000 retailers became zero," says Mr. Zucker. The preliminary letters, and others sent after the complaint, made it clear that selling Buckyballs was still considered lawful pending adjudication. "But if you're a store like Brookstone or Urban Outfitters . . . you're bullied into it. You don't want problems."


. . .


Maxfield & Oberton resolved to take to the public square.On July 27, just two days after the commission filed suit, the company launched a publicity campaign to rally customers and spotlight the commission's nanny-state excesses. The campaign's tagline? "Save Our Balls."

Online ads pointed out how, under the commission's reasoning, everything from coconuts ("tasty fruit or deadly sky ballistic?") to stairways ("are they really worth the risk?") to hot dogs ("delicious but deadly") could be banned.


. . .


. . . in February [2013] the Buckyballs saga took a chilling turn: The commission filed a motion requesting that Mr. Zucker be held personally liable for the costs of the recall, which it estimated at $57 million, if the product was ultimately determined to be defective.

This was an astounding departure from the principle of limited liability at the heart of U.S. corporate law.


. . .


Given the fact that Buckyballs have now long been off the market, the attempt to go after Mr. Zucker personally raises the question of retaliation for his public campaign against the commission. Mr. Zucker won't speculate about the commission's motives. "It's very selective and very aggressive," he says.



For the full interview, see:

SOHRAB AHMARI, interviewer. "THE WEEKEND INTERVIEW with Craig Zucker; What Happens When a Man Takes on the Feds; Buckyballs was the hottest office game on the market. Then regulators banned it. Now the government wants to ruin the CEO who fought back." The Wall Street Journal (Sat., August 31, 2013): A11.

(Note: ellipses, and bracketed year, added.)

(Note: the online version of the interview has the date August 30, 2013, and has the title "THE WEEKEND INTERVIEW; Craig Zucker: What Happens When a Man Takes on the Feds. Buckyballs was the hottest office game on the market. Then regulators banned it. Now the government wants to ruin the CEO who fought back.")





September 15, 2013

When Google Earned a Profit, Sergey Brin "Felt Like We Had Built a Real Business"



(p. 94) . . . , Google was reaping rewards, and 2002 was its first profitable year. "That's really satisfying," Brin said at the time. "Honestly, when we were still in the dot-com boom days, I felt like a schmuck. I had an Internet start-up-- so did everybody else. It was unprofitable, like everybody else's, and how hard is that? But when we became profitable, I felt like we had built a real business."


Source:

Levy, Steven. In the Plex: How Google Thinks, Works, and Shapes Our Lives. New York: Simon & Schuster, 2011.

(Note: ellipsis added.)






September 7, 2013

Yahoo Valued "Marketing Gimmicks" More than Search Speed



(p. 44) Google had struck a deal to handle all the search traffic of Yahoo, one of the biggest portals on the web.

The deal--announced on June 26, 2000--was a frustrating development to the head of Yahoo's search team, Udi Manber. He had been arguing that Yahoo should develop its own search product (at the time, it was licensing technology from Inktomi), but his bosses weren't interested. Yahoo's executives, led by a VC-approved CEO named Timothy Koogle (described in a BusinessWeek cover story as "The Grown-up Voice of Reason at Yahoo"), instead were devoting their attention to branding--marketing gimmicks such as putting the purple corporate logo on the Zamboni machine that swept the ice between periods of San Jose Sharks hockey games. "I had six people working on my search team," Manber said. "I couldn't get the seventh. This was a company that had thousands of people. I could not get the seventh." Since Yahoo wasn't going to develop its own search, Manber had the task of finding the best one to license.



Source:

Levy, Steven. In the Plex: How Google Thinks, Works, and Shapes Our Lives. New York: Simon & Schuster, 2011.

(Note: italics in original.)






September 3, 2013

Redundancy Allowed Google to Function with Cheap and Failure-Prone Hard Drives



(p. 42) . . . as the web kept growing, Google added more machines--by the end of 1999, there were eighty machines involved in the crawl (out of a total of almost three thousand Google computers at that time)--and the likelihood that something would break increased dramatically. Especially since Google made a point of buying what its engineers referred to as "el cheapo" equipment. Instead of commercial units that carefully processed and checked information, Google would buy discounted consumer models without built-in processes to protect the integrity of data.

As a stopgap measure, the engineers had implemented a scheme where the indexing data was stored on different hard drives. If a machine went bad, everyone's pager would start buzzing, even if it was the middle of the night, and they'd barrel into the office immediately to stop the crawl, copy the data, and change the configuration files. "This happened every few days, and it basically stopped everything and was very painful," says Sanjay Ghemawat, one of the DEC research wizards who had joined Google.


. . .


(p. 43) The experience led to an ambitious revamp of the way the entire Google infrastructure dealt with files. "I always had wanted to build a file system, and it was pretty clear that this was something we were going to have to do," says Ghemawat, who led the team. Though there had previously been systems that handled information distributed over multiple files, Google's could handle bigger data loads and was more nimble at running full speed in the face of disk crashes-- which it had to be because, with Google's philosophy of buying supercheap components, failure was the norm. "The main idea was that we wanted the file system to automate dealing with failures, and to do that, the file system would keep multiple copies and it would make new copies when some copy failed," says Ghemawat.



Source:

Levy, Steven. In the Plex: How Google Thinks, Works, and Shapes Our Lives. New York: Simon & Schuster, 2011.

(Note: ellipses added.)






August 22, 2013

"We Just Begged and Borrowed" for Equipment



(p. 32) Google was handling as many as 10,000 queries a day. At times it was consuming half of Stanford's Internet capacity. Its appetite for equipment and bandwidth was voracious. "We just begged and borrowed," says Page. "There were tons of computers around, and we managed to get some." Page's dorm room was essentially Google's operations center, with a motley assortment of computers from various manufacturers stuffed into a homemade version of a server rack-- a storage cabinet made of Legos. Larry and Sergey would hang around the loading dock to see who on campus was getting computers-- companies like Intel and Sun gave lots of free machines to Stanford to curry favor with employees of the future-- (p. 33) and then the pair would ask the recipients if they could share some of the bounty.

That still wasn't enough. To store the millions of pages they had crawled, the pair had to buy their own high-capacity disk drives. Page, who had a talent for squeezing the most out of a buck, found a place that sold refurbished disks at prices so low-- a tenth of the original cost-- that something was clearly wrong with them. "I did the research and figured out that they were okay as long as you replaced the [disk] operating system," he says. "We got 120 drives, about nine gigs each. So it was about a terabyte of space." It was an approach that Google would later adopt in building infrastructure at low cost.

Larry and Sergey would be sitting by the monitor, watching the queries-- at peak times, there would be a new one every second-- and it would be clear that they'd need even more equipment. What next? they'd ask themselves. Maybe this is real.



Source:

Levy, Steven. In the Plex: How Google Thinks, Works, and Shapes Our Lives. New York: Simon & Schuster, 2011.

(Note: italics in original.)






July 31, 2013

Falling Computer Prices Cured the "Digital Divide"



(p. 304) The more evident the power of the internet as an uplifting force became, the more evident the divide between the digital haves and have-nots. One sociological study concluded that there were "two Americas" emerging. The citizens of one America were poor people who could not afford a computer, and of the other, wealthy individuals equipped with PCs who reaped all the benefits. During the 1990s, when technology boosters like me were promoting the advent of the internet, we were often asked: What are we going to do about the digital divide? My an-(p. 305)swer was simple: nothing. We didn't have to do anything, because the natural history of a technology such as the internet was self-fulfilling. The have-nots were a temporary imbalance that would be cured (and more) by technological forces. There was so much profit to be made connecting up the rest of the world, and the unconnected were so eager to join, that they were already paying higher telecom rates (when they could get such service) than the haves. Furthermore, the costs of both computers and connectivity were dropping by the month. At that time most poor in America owned televisions and had monthly cable bills. Owning a computer and having internet access was no more expensive and would soon be cheaper than TV. In a decade, the necessary outlay would become just a $100 laptop. Within the lifetimes of all born in the last decade, computers of some sort (connectors, really) will cost $5.


Source:

Kelly, Kevin. What Technology Wants. New York: Viking Adult, 2010.






July 28, 2013

Children of Chinese Entrepreneurs Want to Work for Government



XieChaoboJoblessEngineeringStudent2013-07-23.jpg













"Engineering student Xie Chaobo has yet to land a job." Source of caption and photo: online version of the WSJ article quoted and cited below.




(p. A1) BEIJING--Xie Chaobo figures he has the credentials to land a job at one of China's big state-owned firms. He is a graduate student at Tsinghua University, one of China's best. His field of study is environmental engineering, one of China's priorities. And he is experimenting with new techniques for identifying water pollutants, which should make him a valuable catch.

But he has applied to 30 companies so far and scored just four interviews, none of which has led to a job.

Although Mr. Xie's parents are entrepreneurs who have built companies that make glasses, shoes and now water pumps, he has no interest in working at a private startup. Chinese students "have been told since we were children to focus on stability instead of risk," the 24-year-old engineering student says.

Over the past decade, the number of new graduates from Chinese universities has increased sixfold to more than six million a year, creating an epic glut that is depressing wages, (p. A10) leaving many recent college graduates without jobs and making students fearful about their future. Two-thirds of Chinese graduates say they want to work either in the government or big state-owned firms, which are seen as recession-proof, rather than at the private companies that have powered China's remarkable economic climb, surveys indicate. Few college students today, according to the surveys, are ready to leave the safe shores of government work and "jump into the sea," as the Chinese expression goes, to join startups or go into business for themselves, although many of their parents did just that in the 1990s.



For the full story, see:

MIKE RAMSEY and VALERIE BAUERLEIN. "Tesla Clashes With Car Dealers; Electric-Vehicle Maker Wants to Sell Directly to Consumers; Critics Say Plan Violates Franchise Laws." The Wall Street Journal (Tues., June 18, 2013): B1-B2.



ChineseStudentAfterGraduationPlans2013-07-23.jpgSource of table: online version of the WSJ article quoted and cited above.






July 24, 2013

Laws to Protect Car Dealers, Keep Car Prices High



TeslaGalleryVirginia2013-07-23.jpg "Tesla 'galleries' such as this one in McLean, Va., can show but not sell cars." Source of caption and photo: online version of the WSJ article quoted and cited below.


(p. B1) RALEIGH, N.C.--Elon Musk made a fortune disrupting the status quo in online shopping and renewable energy. Now he's up against his toughest challenge yet: local car dealers.

Mr. Musk, the billionaire behind PayPal and now Tesla Motors Inc., wants to sell his $70,000 Tesla electric luxury vehicles directly to consumers, bypassing franchised automobile dealers. Dealers are flexing their considerable muscle in states including Texas and Virginia to stop him.

The latest battleground is North Carolina, where the Republican-controlled state Senate last month unanimously approved a measure that would block Tesla from selling online, its only sales outlet here. Tesla has staged whiz-bang test drives for legislators in front of the State House and hired one of the state's most influential lobbyists to stave off a similar vote in the House before the legislative session ends in early July.

The focus of the power struggle between Mr. Musk and auto dealers is a thicket of state franchise laws, many of which go back to the auto industry's earliest days when industry pioneer Henry Ford began turning to eager entrepreneurs to help sell his Model T.

Dealers say laws passed over the decades to prevent car makers from selling directly to consumers are justified because without them auto makers could use their economic clout to sell vehicles for less than their independent franchisees.



For the full story, see:

MIKE RAMSEY and VALERIE BAUERLEIN. "Tesla Clashes With Car Dealers; Electric-Vehicle Maker Wants to Sell Directly to Consumers; Critics Say Plan Violates Franchise Laws." The Wall Street Journal (Tues., June 18, 2013): B1-B2.






July 14, 2013

Record Companies Refused to See Efficiency of Napster Distribution System



AppetiteForSelfDestructionBK2013-07-13.jpg











Source of book image: online version of the WSJ review quoted and cited below.






(p. A15) . . . the central character in "Appetite for Self-Destruction" is technological change.


. . .


Record labels scrambled to negotiate with Napster and develop a legal version of the service with multiple revenue streams. The attempts all failed. In Mr. Knopper's telling, there were unreasonable demands on all sides. But he faults music executives for "cling[ing] to the old, suddenly inefficient model of making CDs and distributing them to record stores. . . . In this world, the labels controlled -- and profited from -- everything." In the new world being ushered in by Napster, he writes, control was shifting "to a snot-nosed punk and his crazy uncle."

The labels' inability to reach an agreement with Napster destroyed "the last chance for the record industry as we know it to stave off certain ruin," Mr. Knopper writes in a typically overheated passage. Had a deal been consummated, he suggests, a legal version of Napster might have generated revenues of $16 billion in 2002 and saved the industry. Whether or not the author's estimate is accurate, his larger point remains: The music industry's big mistake was trying to protect a business model that no longer worked. Litigation would not keep music consumers offline.



For the full review, see:

JEREMY PHILIPS. "BUSINESS BOOKSHELF; Spinning Out of Control; How the record industry missed out on a chance to compete in a new digital world." The Wall Street Journal (Weds., February 11, 2009): A15.

(Note: first two ellipses added; third ellipsis in original.)


The book under review is:

Knopper, Steve. Appetite for Self-Destruction: The Spectacular Crash of the Record Industry in the Digital Age. New York: Free Press, 2009.






July 8, 2013

Project Entrepreneur Would Rather Change the World than Buy a Luxury Car



HoffmanReidGreylockPartners2013-06-28.jpg"Reid Hoffman at Greylock Partners foresees a tectonic shift coming in the Web, with data and its many uses as the new linchpin, replacing identity and relationships." Source of caption and photo: online version of the NYT article quoted and cited below.


(p. 5) As an executive vice president, it was up to Mr. Hoffman to manage external relations. "He was the firefighter in chief at PayPal," Mr. Thiel says. "Though that diminishes his role because there were many, many fires."

Mr. Hoffman emerged as a connector and high-level strategist. He packed his schedule with meetings, charmed credit card companies and soothed the regulators.

PayPal survived, and when the company went public, in 2002, Mr. Hoffman and many of his colleagues became multimillionaires.

Mr. Thiel splurged on a Ferrari. Mr. Hoffman wanted to buy an Audi but instead invested his newfound riches in one of the first solar panel companies to come out of Silicon Valley, Nanosolar, and bought an Acura instead.

"I started to think about the value of money," he says. "I thought if I only had $75,000, would I rather invest in a luxury car or make a play in changing the world?"

Nanosolar became a multibillion-dollar enterprise.



For the full story, see:

EVELYN M. RUSLI. "A King of Connections; How Reid Hoffman of LinkedIn Became Tech's Go-To Guy." The New York Times, SundayBusiness Section (Sun., November 6, 2011): 1 & 5.

(Note: ellipsis added.)

(Note: the online version of the article has the date November 5, 2011, and has the title "A King of Connections Is Tech's Go-To Guy.")






July 4, 2013

Walker Says Those Who Call Him "Patent Troll" Want His Property Without Paying



WalkerJayPatentDefender2013-06-28.jpg














Source of caption and photo: online version of the WSJ article quoted and cited below.




(p. B1) Jay Walker turned his idea for "name your own price" Internet auctions into a fortune by starting Priceline.com Inc. Now the entrepreneur is trying to cash in on his ideas by suing other companies.

Since it was founded in 1994 as a research lab, Walker Digital LLC has made much of its money by spinning out its inventions, like online travel agent Priceline and vending-machine firm Vendmore Systems LLC, as independent businesses.


. . .


Mr. Walker defends his newly aggressive tactics, which some critics compare to those of "patent trolls," a derogatory term for firms that opportunistically enforce patents. Without the lawsuits, he said, his patents could expire while other companies exploit them. Patents have a 20-year lifespan.

"Not only are we not a troll, but the people who want to label me are often the same ones that want to use our property and not pay," Mr. Walker said in an interview.



For the full story, see:

JOHN LETZING. "Founder of Priceline Spoiling for a Fight Over Tech Patents." The Wall Street Journal (Mon., August 22, 2011): B1 & B10.

(Note: ellipsis added.)






July 2, 2013

Property Rights, Flexible Work Rules, Open Markets Are Keys to Economic Growth



BalanceBK2013-06-28.jpg











Source of book image: online version of the WSJ review quoted and cited below.







(p. A11) Messrs. Hubbard and Kane argue, as do others, that certain policies and core principles are the key: property rights, flexible work rules, open markets. For the authors, such matters explain economic growth entirely.

To those who would cite the primacy of technological breakthroughs, Messrs. Hubbard and Kane assert that inventions only spark growth if there are systems in place (such as intellectual-property rights) that enable inventions to flourish and their value to spread. "The wheel and the windmill were invented many times," they write, "then forgotten, until finally one society had the institutional framework to implement them widely and pass them on permanently." In short, "institutions explain innovation."



For the full review, see:

Matthew Rees. "BOOKSHELF; How the Mighty Fall; The Roman empire eventually lost its economic vitality thanks to price controls, heavy taxes and state-sponsored debt relief." The Wall Street Journal (Fri., June 21, 2013): A11.

(Note: ellipses added.)

(Note: the online version of the review has the date June 20, 2013.)


The book under review, is:

Hubbard, Glenn, and Tim Kane. Balance: The Economics of Great Powers from Ancient Rome to Modern America. New York: Simon & Schuster, 2013.






June 30, 2013

iPhone: "A Gleaming World of Innovation and Opportunity, of Capitalism Behaving Well"



SubwayIphoneUse2013-06-21.jpg "The theft of electronic devices like iPhones has fueled a rise in subway crime this year, the police say. In the past, New Yorkers were mugged, sometimes killed, for bomber jackets, Cazal glasses and Air Jordan sneakers." Source of caption: print version of the NYT article quoted and cited below. Source of photo: online version of the NYT article quoted and cited below.



(p.24) The current spate of iPhone thefts feels, if anything, more poignant than disruptive. Apple products have always read as cooler than their rivals' because their design suggests a gleaming world of innovation and opportunity, of capitalism behaving well -- a world that seems ever diminishing, ever less accessible to the struggling and young.

Unlike the sneakers and glasses that caused such a fury in the '80s and '90s, iPhones didn't originate in the celebrity system. They come with a democratic ethos (if not the analogous price tag); BlackBerrys are for suits, but even a child can work an iPhone. Wasn't everyone supposed to have a shot?



For the full story, see:

GINIA BELLAFANTE. "BIG CITY; Easy to Use and Easy to Steal, a Status Object Inches Out of Reach." The New York Times, First Section (Sun., October 30, 2011): 24.

(Note: the first paragraph quoted above is from the print version, rather than from the somewhat different online version. The second quoted paragraph is the same in both versions.)

(Note: the online version of the story has the date October 28, 2011, and has the slightly different title "BIG CITY; Easy to Use, or Steal, but Inching Out of Reach.")






June 26, 2013

Larry Page Makes an O.K. Decision Now, Rather than a Perfect Decision Later



PageLarryGoogleCEO2013-06-21.jpg "Larry Page has pushed for quicker decision-making and jettisoned more than 25 projects that were not up to snuff." Source of caption and photo: online version of the NYT article quoted and cited below.



(p. A1) MOUNTAIN VIEW, Calif. -- Larry Page, Google's chief executive, so hates wasting time at meetings that he once dumped his secretary to avoid being scheduled for them. He does not much like e-mail either -- even his own Gmail -- saying the tedious back-and-forth takes too long to solve problems.


. . .


(p. A3) Borrowing from the playbooks of executives like Steven P. Jobs and Mayor Michael R. Bloomberg, he has put his personal imprint on the corporate culture, from discouraging excessive use of e-mail to embracing quick, unilateral decision-making -- by him, if need be.

"Ever since taking over as C.E.O., I have focused much of my energy on increasing Google's velocity and execution, and we're beginning to see results," Mr. Page, 38, told analysts recently.


. . .


Despite the many external pressures on Google, it is dominant in its business and highly profitable. But, when asked at a recent conference about the biggest threat to his company, Mr. Page answered in one word, "Google."

The problem was that the company had ballooned so quickly -- it now has more than 31,000 employees and $27.3 billion in revenue so far this year -- that it had become sclerotic. A triumvirate of Mr. Page, his co-founder, Sergey Brin, and Eric E. Schmidt, Google's former chief and current chairman, had to agree before anything could be done. The unwieldy management and glacial pace of decision-making were particularly noticeable in the Valley, where start-ups overtake behemoths in months.

It is different now.

"It's much more of a style like Steve Jobs than the three-headed monster that Google was," said a former Google executive who has spoken with current executives about the changes and spoke anonymously to preserve business relationships. "When Eric was there, you'd walk into a product meeting or a senior staff meeting, and everyone got to weigh in on every decision. Larry is much more willing to make an O.K. decision and make it now, rather than a perfect decision later."



For the full story, see:

CLAIRE CAIN MILLER. "Google's Chief Works to Trim a Bloated Ship." The New York Times (Thurs., November 10, 2011): A1 & A3.

(Note: ellipses added.)

(Note: the online version of the story has the date November 9, 2011.)






June 12, 2013

Patents Turned Steam from Toy to Engine



TheMostPowerfulIdeaInTheWorldBK2013-05-13.JPG

















Source of book image: http://img2.imagesbn.com/p/9781400067053_p0_v1_s260x420.JPG



(p. 20) The obvious audience for Rosen's book consists of those who hunger to know what it took to go from Heron of Alexandria's toy engine, created in the first century A.D., to practical and brawny beasts like George and Robert Stephenson's Rocket, which kicked off the age of steam locomotion in 1829. But Rosen is aiming for more than a fan club of steam geeks. The "most powerful idea" of his title is not an early locomotive: "The Industrial Revolution was, first and foremost, a revolution in invention," he writes, "a radical transformation in the process of invention itself." The road to Rocket was built with hundreds of innovations large and small that helped drain the mines, run the mills, and move coal and then people over rails.


. . .


Underlying it all, Rosen argues, was the recognition that ideas themselves have economic value, which is to say, this book isn't just gearhead wonkery, it's legal wonkery too. Abraham Lincoln, wondering why Heron's steam engine languished, claimed that the patent system "added the fuel of interest to the fire of genius." Rosen agrees, offering a forceful argument in the debate, which has gone on for centuries, over whether patents promote innovation or retard it.

Those who believe passionately, as Thomas Jefferson did, that inventions "cannot, in nature, be a subject of property," are unlikely to be convinced. Those who agree with the inventors James Watt and Richard Arkwright, who wrote in a manuscript that "an engineer's life without patent is not worthwhile," will cheer. Either way, Rosen's presentation of this highly intellectual debate will reward even those readers who never wondered how the up-and-down chugging of a piston is converted into consistent rotary motion.



For the full review, see:

JOHN SCHWARTZ. "Steam-Driven Dreams." The New York Times (Sun., August 29, 2010): 20.

(Note: ellipsis added; italicized words in original.)

(Note: the online version of the review has the date August 26, 2010.)


The book under review, is:

Rosen, William. The Most Powerful Idea in the World: A Story of Steam, Industry, and Invention. New York: Random House, 2010.






June 9, 2013

Moore's Law: Inevitable or Intel?




I believe that Moore's Law remained true for a long time, not because it was inevitable, but because an exemplary company worked very hard and effectively to make it true.


(p. 159) In brief, Moore's Law predicts that computing chips will shrink by half in size and cost every 18 to 24 months. For the past 50 years it has been astoundingly correct.

It has been steady and true, but does Moore's Law reveal an imperative in the technium? In other words is Moore's Law in some way inevitable? The answer is pivotal for civilization for several reasons. First, Moore's Law represents the acceleration in computer technology, which is accelerating everything else. Faster jet engines don't lead to higher corn yields, nor do better lasers lead to faster drug discoveries, but faster computer chips lead to all of these. These days all technology follows computer technology. Second, finding inevitability in one key area of technology suggests invariance and directionality may be found in the
rest of the technium.



Source:

Kelly, Kevin. What Technology Wants. New York: Viking Adult, 2010.






May 12, 2013

Knowledge Economy Migrating to Intangible Goods and Services



(p. 67) Our present economic migration from a material-based industry to a knowledge economy of intangible goods (such as software, design, and media products) is just the latest in a steady move toward the immaterial. (Not that material processing has let up, just that intangible processing is now more economically valuable.) Richard Fisher, president of the Federal Reserve Bank of Dallas, says, "Data from nearly all parts of the world show us that consumers tend to spend relatively less on goods and more on services as their incomes rise. . . . Once people have met their basic needs, they tend to want medical care, transportation and communication, information, recreation, entertainment, financial and legal advice, and the like." The disembodiment of value (more value, less mass) is a steady trend in the technium. In six years the average weight per dollar of U.S. exports (the most valuable things the U.S. produces) (p. 68) dropped by half. Today, 40 percent of U.S. exports are services (intangibles) rather than manufactured goods (atoms). We are steadily substituting intangible design, flexibility, innovation, and smartness for rigid, heavy atoms. In a very real sense our entry into a service- and idea-based economy is a continuation of a trend that began at the big bang.


Source:

Kelly, Kevin. What Technology Wants. New York: Viking Adult, 2010.

(Note: ellipsis in original; a graph is omitted that appears in the middle of the paragraph quoted above.)






April 19, 2013

New Technology Allows Maple Syrup Farms to Adapt and Thrive with Global Warming



MapleSyrupTubingVermont2013-04-06.jpg "Tom Morse, left, and his father, Burr, at work on their maple farm in Vermont." Source of caption and photo: online version of the NYT article quoted and cited below.


(p. 11) Scientists say the tapping season -- the narrow window of freezing nights and daytime temperatures over 40 degrees needed to convert starch to sugar and get sap flowing -- is on average five days shorter than it was 50 years ago. But technology developed over the past decade and improved in recent years offers maple farmers like Mr. Morse a way to offset the effects of climate change with high-tech tactics that are far from natural.

Today, five miles of pressurized blue tubing spider webs down the hillside at Morse Farm, pulling sap from thousands of trees and spitting it into tubs like an immense, inverse IV machine. Modern vacuum pumps are powerful enough to suck the air out of a stainless steel dairy tank and implode it, and they help producers pull in twice as much sap as before.

"You can make it run when nature wouldn't have it run," Mr. Morse said.

His greatest secret weapon is a reverse-osmosis machine that concentrates the sap by pulling it through sensitive membranes, greatly increasing the sugar content before it even hits the boiler. The $8,000 instrument with buttons and dials looks like it belongs in a Jetsons-era laboratory more than in a Vermont sugarhouse. But it saves more fuel and money than every other innovation combined. With it Mr. Morse can process sap into syrup in 30 minutes, something that used to take two hours.


. . .


The biggest United States maple farmers have expanded their production acreage and are tapping more trees than ever before: the total was 5.5 million taps last year, compared with slightly over 4 million taps 10 years earlier.

As a result, United States maple syrup production hit a new high in 2011. In Vermont, the top-producing state, sap yield per tap has risen over the past decade.



For the full story, see:

JULIA SCOTT. "Maple Syrup: Old-Fashioned Product, Newfangled Means of Production." The New York Times, First Section (Sun., March 31, 2013): 11.

(Note: ellipsis added.)

(Note: the online version of the story has the date March 30, 2013, and has the title "High-Tech Means of Production Belies Nostalgic Image of Maple Syrup.")






April 1, 2013

Kevin Kelly Explains and Criticizes Amish Attitude toward Technology



WhatTechnologyWants2013-03-09.jpg
















Source of book image: http://thesocietypages.org/cyborgology/files/2012/02/kevin-kelly-book_rdax_620x349-300x285.jpg



Kevin Kelly's book has received a lot of attention, sometimes in conjunction with Steven Johnson's Where Good Ideas Come From, with which it shares some themes. I found the Kelly book valuable, but frustrating.

The valuable part includes the discussion of the benefits of technology, and the chapter detailing Amish attitudes and practices related to technology. On the latter, for instance, I learned that the Amish do not categorically reject new technology, but believe that it should be adopted more slowly, after long community deliberation.

What frustrated me most about the book is that it argues that technology has a life of its own and that technological progress is predetermined and inevitable. (I believe that technological progress depends on enlightened government policies and active entrepreneurial initiative, neither of which is inevitable.)

In the next several weeks, I will be quoting some of the more important or thought-provoking passages in the book.


The reference for Kelly's book, is:

Kelly, Kevin. What Technology Wants. New York: Viking Adult, 2010.



The Johnson book mentioned above, is:

Johnson, Steven. Where Good Ideas Come From: The Natural History of Innovation. New York: Riverhead Books, 2010.






March 28, 2013

Driving to MobileIron Job Interview in $100,000 Car, Tells CEO Tinker You Are Not Hungry Enough



TinkerRobertMobileIronCEO2013-03-09.jpg "Above, Robert Tinker, the chief executive of MobileIron, at its offices in Mountain View, Calif." Source of caption and photo: online version of the NYT article quoted and cited below.


(p. B2) "There are disruptions everywhere," said Robert Tinker, the chief executive of MobileIron, which makes software for companies to manage smartphones and tablets. "Mobile disrupts personal computers, a market worth billions. Cloud disrupts computer servers and data storage, billions of dollars more. Social may be one of those rare things that is totally new."

Relative to the size of the markets that mobile devices, cloud computing and social media are toppling, he says, the valuations are reasonable.

But most of these chief executives are also veterans of the Internet bubble of the late '90s, and confess to worries that maybe things are not so different this time. Mr. Tinker, 43, drives a 1995 Ford Explorer that has logged 265,000 miles.

"If somebody comes to a job interview here in a $100,000 car, I know he's not hungry," he said. "The reality is, I've taken $94 million in investors' money, and we haven't gone public yet. I feel that responsibility every day."



For the full story, see:

QUENTIN HARDY. "A Billion-Dollar Club, and Not So Exclusive." The New York Times (Weds., February 5, 2013): B1 & B2.

(Note: the online version of the story has the date February 4, 2013.)






March 24, 2013

Many Corporations Refused to Finance Semiconductors



FairlchildSemiconductorEightFounders2013-03-08.jpg "Shown in 1960, the eight engineers who founded Fairchild Semiconductor and revolutionized world technology in "Silicon Valley," an "American Experience" documentary, . . . ." Source of caption and photo: online version of the NYT review quoted and cited below.


(p. C4) "Silicon Valley" is a deceptively grand title for the new "American Experience" documentary Tuesday night on PBS. "Fairchild Semiconductor" would be more accurate.


. . .


One startling image shows a handwritten list of the many corporations that declined to bankroll the eight pioneers before Fairchild Camera and Instrument said yes. If any of them had possessed more foresight, the silicon chip might have belonged to National Cash Register, Motorola, Philco, BorgWarner, Chrysler, General Mills or United Shoe.



For the full review, see:

MIKE HALE. "Men Who Took Silicon to Silicon Valley." The New York Times (Tues., February 5, 2013): C4.

(Note: ellipses in caption, and in quoted passage, added.)

(Note: the online version of the review has the date February 4, 2013.)



The "Silicon Valley" program first aired on PBS on 2/5/13 and can be viewed at:

http://video.pbs.org/video/2332168287






March 20, 2013

Many New Tech Entrepreneurs Shun "Fast Cars and Fancy Parties"



LibinPhilEvernoteCEO2013-03-09.jpg

















"Phil Libin, chief of Evernote, at its headquarters in Redwood City, Calif." Source of caption and photo: online version of the NYT article quoted and cited below.





(p. B1) SAN FRANCISCO -- The number of privately held Silicon Valley start-ups that are worth more than $1 billion shocks even the executives running those companies.

"I thought we were special," said Phil Libin, chief executive of Evernote, an online consumer service for storing clippings, photos and bits of information as he counted his $1 billion-plus peers.

He started Evernote in 2008 on the eve of the recession and built it methodically. "A lot of us didn't set out to have a big valuation, we're just trying to build something that lasts," Mr. Libin said. "There is no safe industry anymore, even here."


. . .


(p. B2) Silicon Valley entrepreneurs contend that the price spiral is not a sign of another tech bubble. The high prices are reasonable, they say, because innovations like smartphones and cloud computing will remake a technology industry that is already worth hundreds of billions of dollars.


. . .


The founders of the highly valued companies are old enough to remember past busts, and many shun the bubble lifestyle of fast cars and fancy parties.

Mr. Libin, who said he grew up on food stamps as the son of Russian immigrants in the Bronx, became a millionaire when he sold his first company, Engine5, to Vignette in 2000.

"The company I sold to, there were purple Lamborghinis in the garage. I got into watches," he said. "Maybe a half-dozen, nothing over $10,000, but I needed this glass and leather watch winder."

Evernote started as the financial crisis hit. "One night I was almost busted again," he said, "and there was that watch winder on the shelf, mocking me."

"Every job out there is insecure now," he said. "People sell 10 percent of their stock, and they have an incentive to make the other 90 percent worth more. They are still working, but not worrying about what will happen to their home or their kids."



For the full story, see:

QUENTIN HARDY. "A Billion-Dollar Club, and Not So Exclusive." The New York Times (Weds., February 5, 2013): B1 & B2.

(Note: the online version of the story has the date February 4, 2013.)






March 11, 2013

Open Systems Limit the Integrated Vision that Creates Great Products




The following passage is Steve Jobs speaking, as quoted by Walter Isaacson.


(p. 568) People pay us to integrate things for them, because they don't have the time to think about this stuff 24/7. If you have an extreme passion for producing great products, it pushes you to be integrated, to connect your hardware and your software and content management. You want to break new ground, so you have to do it yourself. If you want to allow your products to be open to other hardware or software, you have to give up some of your vision.


Source:

Isaacson, Walter. Steve Jobs. New York: Simon & Schuster, 2011.






March 7, 2013

Steve Jobs: "Never Rely on Market Research"




The following passage is Steve Jobs speaking, as quoted by Walter Isaacson.


(p. 567) Some people say, "Give the customers what they want." But that's not my approach. Our job is to figure out what they're going to want before they do. I think Henry Ford once said, "If I'd asked customers what they wanted, they would have told me, 'A faster horse!'" People don't know what they want until you show it to them. That's why I never rely on market research. Our task is to read things that are not yet on the page.


Source:

Isaacson, Walter. Steve Jobs. New York: Simon & Schuster, 2011.






March 1, 2013

Google's Eric Schmidt Saw that "Regulation Prohibits Real Innovation"



(p. A13) Eric Schmidt, executive chairman of Google, gave a remarkable interview this month to The Washington Post. So remarkable that Post editors preceded the transcript with this disclosure: "He had just come from the dentist. And he had a toothache."

Perhaps it was the Novocain talking, but Mr. Schmidt has done us a service. He said in public what most technologists will say only in private. Whatever caused him to speak forthrightly about the disconnects between Silicon Valley and Washington, his comments deserve wider attention.

Mr. Schmidt had just given his first congressional testimony. He was called before the Senate Judiciary Antitrust Subcommittee to answer allegations that Google is a monopolist, a charge the Federal Trade Commission is also investigating.

"So we get hauled in front of the Congress for developing a product that's free, that serves a billion people. OK? I mean, I don't know how to say it any clearer," Mr. Schmidt told the Post. "It's not like we raised prices. We could lower prices from free to . . . lower than free? You see what I'm saying?"


. . .


"Regulation prohibits real innovation, because the regulation essentially defines a path to follow," Mr. Schmidt said. This "by definition has a bias to the current outcome, because it's a path for the current outcome."


. . .


Washington is always slow to recognize technological change, which is why in their time IBM and Microsoft were also investigated after competing technologies had emerged.

Mr. Schmidt recounted a dinner in 1995 featuring a talk by Andy Grove, a founder of Intel: "He says, 'This is easy to understand. High tech runs three times faster than normal businesses. And the government runs three times slower than normal businesses. So we have a nine-times gap.' All of my experiences are consistent with Andy Grove's observation."

Mr. Schmidt explained there was only one way to deal with this nine-times gap, which this column hereby christens "Grove's Law of Government." That is "to make sure that the government does not get in the way and slow things down."

Mr. Schmidt recounted that when Silicon Valley first started playing a large role in the economy in the 1990s, "all of a sudden the politicians showed up. We thought the politicians showed up because they loved us. It's fair to say they loved us for our money."

He contrasted innovation in Silicon Valley with innovation in Washington. "Now there are startups in Washington," he said, "founded by people who were policy makers. . . . They're very clever people, and they've figured out a way in regulation to discriminate, to find a new satellite spectrum or a new frequency or whatever. They immediately hired a whole bunch of lobbyists. They raised some money to do that. And they're trying to innovate through regulation. So that's what passes for innovation in Washington."



For the full commentary, see:

L. GORDON CROVITZ. "INFORMATION AGE; Google Speaks Truth to Power; About the growing regulatory state, even Google's Eric Schmidt--a big supporter of the Obama administration--now feels the need to tell it like it is." The Wall Street Journal (Mon., October 24, 2011): A13.

(Note: ellipses between paragraphs added; ellipsis internal to Schmidt quote, in original WSJ commentary.)


The original Eric Schmidt interview with the Washington Post, can be read at:

http://articles.washingtonpost.com/2011-10-01/national/35278181_1_google-chairman-eric-schmidt-regulation-disconnects







February 17, 2013

Higher Taxes Would Slow Creation of Entrepreneur Bronfein's Time-Saving Medical Robotic Systems



(p. A11) . . . in Baltimore, . . . a local entrepreneur, following the logic of need, invested seven years and $30 million developing a robotic system for packaging prescription drugs for long-term patients in nursing homes and hospitals.

In a conversation last year, inventor Michael Bronfein told me if he'd known what it would cost him in time and money, he might never have started. How many entrepreneurs say the same? Probably all of them. But Mr. Bronfein saw a need and the power of technology to meet it, and the result was the Paxit automated medication dispensing system.

He saw workers spending hours under the old system sticking pills in monthly blister packs known as "bingo cards," a process expensive and error-prone. He saw nurses on the receiving end then spending time to pluck the pills out of blister packs and into paper cups, to create the proper daily drug regimen for each patient.


. . .


He followed the economic logic that indicated that all the people involved in the old system were becoming too valuable to have their time wasted by the old system. Backed by his company, Remedi SeniorCare, Paxit--in which a robot packages, labels and dispatches a daily round of medicines for each patient--is spreading across the mid-Atlantic and Midwest and winning plaudits from medical-care providers.

. . .


We need to preserve the incentive for investors to bring us the robots that will make the future bearable, rather than burying entrepreneurs in taxes in a vain attempt to seize the returns of investments before those investments are made.



For the full commentary, see:

Jenkins, HOLMAN W., JR. "BUSINESS WORLD; Robots to the Rescue? The flip side of an entitlements crisis is a labor shortage." The Wall Street Journal (Weds., January 9, 2013): A11.

(Note: ellipses added.)

(Note: the online version of the review has the date January 8, 2013.)






February 11, 2013

Apple's Corporate Culture Under Jobs: "Accountability Is Strictly Enforced"



(p. 531) In theory, you could go to your iPhone or any computer and access all aspects of your digital life. There was, however, a big problem: The service, to use Jobs's terminology, sucked. It was complex, devices didn't sync well, and email and other data got lost randomly in the ether. "Apple's MobileMe Is Far Too Flawed to Be Reliable," was the headline on Walt Mossberg's review in the Wall Street Journal.

Jobs was furious. He gathered the MobileMe team in the auditorium on the Apple campus, stood onstage, and asked, "Can anyone tell me what MobileMe is supposed to do?" After the team members offered their answers, Jobs shot back: "So why the fuck doesn't it do that?" Over the next half hour he continued to berate them. "You've tarnished Apple's reputation," he said. You should hate each other for having let each other down. Mossberg, our friend, is no longer writing good things about us." In front of the whole audience, he got rid of the leader of the MobileMe team and replaced him with Eddy Cue, who oversaw all Internet content at Apple. As Fortune's Adam Lashinsky reported in a dissection of the Apple corporate culture, "Accountability is strictly enforced."




Source:

Isaacson, Walter. Steve Jobs. New York: Simon & Schuster, 2011.






January 23, 2013

David Koch Institute for Integrative Cancer Research



LangerRobertResearchLab2013-01-12.jpg "Dr. Robert Langer's research lab is at the forefront of moving academic discoveries into the marketplace." Source of caption and photo: online version of the NYT article quoted and cited below.


(p. 1) HOW do you take particles in a test tube, or components in a tiny chip, and turn them into a $100 million company?

Dr. Robert Langer, 64, knows how. Since the 1980s, his Langer Lab at the Massachusetts Institute of Technology has spun out companies whose products treat cancer, diabetes, heart disease and schizophrenia, among other diseases, and even thicken hair.

The Langer Lab is on the front lines of turning discoveries made in the lab into a range of drugs and drug delivery systems. Without this kind of technology transfer, the thinking goes, scientific discoveries might well sit on the shelf, stifling innovation.

A chemical engineer by training, Dr. Langer has helped start 25 companies and has 811 patents, issued or pending, to his name. More than 250 companies have licensed or sublicensed Langer Lab patents.

Polaris Venture Partners, a Boston venture capital firm, has invested $220 million in 18 Langer Lab-inspired businesses. Combined, these businesses have improved the health of many millions of people, says Terry McGuire, co-founder of Polaris.


. . .


(p. 7) Operating from the sixth floor of the David H. Koch Institute for Integrative Cancer Research on the M.I.T. campus in Cambridge, Mass., Dr. Langer's lab has a research budget of more than $10 million for 2012, coming mostly from federal sources.


. . .


David H. Koch, executive vice president of Koch Industries, the conglomerate based in Wichita, Kan., wrote in an e-mail that "innovation and education have long fueled the world's most powerful economies, so I can't think of a better or more natural synergy than the one between academia and industry." Mr. Koch endowed Dr. Langer's professorship at M.I.T. and is a graduate of the university.



For the full story, see:

HANNAH SELIGSON. "Hatching Ideas, and Companies, by the Dozens at M.I.T." The New York Times, SundayBusiness Section (Sun., November 25, 2012): 1 & 7.

(Note: ellipses added.)

(Note: the online version of the story has the date November 24, 2012.)






January 18, 2013

Steve Jobs Was Deeply Influenced by Clayton Christensen's "The Innovator's Dilemma"



(p. 408) Microsoft was willing to license its Windows Media software and digital rights format to other companies, just as it had licensed out its operating system in the 1980s. Jobs, on the other hand, would not license out Apple's FairPlay to other device makers; it worked only on an iPod. Nor would he allow other online stores to sell songs for use on iPods. A variety of experts said this would eventually cause Apple to lose market share, as it did in the computer wars of the 1980s. "If Apple continues to rely on a proprietary architecture," the Harvard Business School professor Clayton Christensen told Wired, "the iPod will likely become a niche product." (Other than in this case, Christensen was one of the world's most insightful business analysts, and Jobs was deeply (p. 409) influenced by his book The Innovator's Dilemma.) Bill Gates made the same argument. "There's nothing unique about music," he said. "This story has played out on the PC."


Source:

Isaacson, Walter. Steve Jobs. New York: Simon & Schuster, 2011.






January 14, 2013

With iTunes, Apple Leapfrogged CD Burners (a Boat Apple Had Missed)




Is the example sketched below, and in a previous entry, a case of a first mover disadvantage? Or is it simply a case of a lucky or wise bounce-back from a genuine mistake?


(p. 382) . . . [Job's] angry insistence that the iMac get rid of its tray disk drive and use instead a more elegant slot drive meant that it could not include the first CD burners, which were initially made for the tray format. "We kind of missed the boat on that," he recalled. "So we needed to catch up real fast." The mark of an innovative company is not only that it comes up with new ideas first, but also that it knows how to leapfrog when it finds itself behind.


Source:

Isaacson, Walter. Steve Jobs. New York: Simon & Schuster, 2011.

(Note: ellipsis and bracketed "Job's" added.)






January 10, 2013

Apple "Finding a Way to Leapfrog Over Its Competitors"




Isaacson says Jobs wanted two refinements in the iMac. One was new colors. The other is discussed below.

I am not sure what to make of this episode. Is Isaacson suggesting that it was good for Apple that Jobs made a mistake on the type of CD hardware to put in the iMac? That this added constraint "would then force Apple to be imaginative and bold"?

Or is the moral that good people who make a lot of quick decisions, make mistakes, sometimes big mistakes, and that Jobs found a way to bounce back from this one?


(p. 356) There was one other important refinement that Jobs wanted for the iMac: getting rid of that detested CD tray. "I'd seen a slot-load drive on a very high-end Sony stereo," he said, "so I went to the drive manufacturers and got them to do a slot-load drive for us for the version of the iMac we did nine months later." Rubinstein tried to argue him out of the change. He predicted that new drives would come along that could burn music onto CDs rather than merely play them, and they would be available in tray form before they were made to work in slots. "If you go to slots, you will always be behind on the technology," Rubinstein argued.

"I don't care, that's what I want," Jobs snapped back. They were having lunch at a sushi bar in San Francisco, and Jobs insisted that they continue the conversation over a walk. "I want you to do the slot-load drive for me as a personal favor," Jobs asked. Rubinstein agreed, of course, but he turned out to be right. Panasonic came out with a CD drive that could rip and burn music, and it was available first for computers that had old-fashioned tray loaders. The effects of this (p. 357) would ripple over the next few years: It would cause Apple to be slow in catering to users who wanted to rip and burn their own music, but that would then force
Apple to be imaginative and bold in finding a way to leapfrog over its competitors when Jobs finally realized that he had to get into the music market.



Source:

Isaacson, Walter. Steve Jobs. New York: Simon & Schuster, 2011.






January 6, 2013

"Think Profit"



(p. 339) At the January 1998 San Francisco Macworld, Jobs took the stage where Amelio had bombed a year earlier. He sported a full beard and a leather jacket as he touted the new product strategy. And for the first time he ended the presentation with a phrase that he would make his signature coda: "Oh, and one more thing . . ." This time the "one more thing" was "Think Profit." When he said those words, the crowd erupted in applause. After two years of staggering losses, Apple had enjoyed a profitable quarter, making $45 million. For the full fiscal year of 1998, it would turn in a $309 million profit. Jobs was back, and so was Apple.


Source:

Isaacson, Walter. Steve Jobs. New York: Simon & Schuster, 2011.

(Note: ellipsis in original.)






January 3, 2013

"People Said He Was a Fraud, But He Turned Out to Be Right"



WhitfieldWillisCleanRoom2013-01-01.jpg













"Willis Whitfield with a mobile clean room in the 1960s." Source of caption and photo: online version of the NYT article quoted and cited below.





(p. B16) Half a century ago, as a rapidly changing world sought increasingly smaller mechanical and electrical components and more sanitary hospital conditions, one of the biggest obstacles to progress was air, and the dust and germs it contains.


. . .


Then, in 1962, Willis Whitfield invented the clean room.

"People said he was a fraud," recalled Gilbert V. Herrera, the director of microsystems science and technology at Sandia National Laboratories in Albuquerque. "But he turned out to be right."


. . .


His clean rooms blew air in from the ceiling and sucked it out from the floor. Filters scrubbed the air before it entered the room. Gravity helped particles exit. It might not seem like a complicated concept, but no one had tried it before. The process could completely replace the air in the room 10 times a minute.

Particle detectors in Mr. Whitfield's clean rooms started showing numbers so low -- a thousand times lower than other methods -- that some people did not believe the readings, or Mr. Whitfield. He was questioned so much that he began understating the efficiency of his method to keep from shocking people.

"I think Whitfield's wrong," a scientist from Bell Labs finally said at a conference where Mr. Whitfield spoke. "It's actually 10 times better than he's saying."



For the full obituary, see:

WILLIAM YARDLEY. "W. Whitfield, 92, Dies; Built Clean Room." The New York Times (Weds., December 5, 2012): B16.

(Note: ellipses added.)

(Note: the online version of the obituary has the date December 4, 2012, and has the title "Willis Whitfield, Inventor of Clean Room That Purges Tiny Particles, Dies at 92.")






January 2, 2013

Jobs Laid Off 3,000 from Apple to Save It from Bankruptcy



(p. 339) In his first year back, Jobs laid off more than three thousand people, which salvaged the company's balance sheet. For the fiscal year that ended when Jobs became interim CEO in September 1997, Apple lost $1.04 billion. "We were less than ninety days from being insolvent," he recalled.


Source:

Isaacson, Walter. Steve Jobs. New York: Simon & Schuster, 2011.






January 1, 2013

Internet Allows Pricing Experiments



PricesVaryByLocationGraphic2012-12-29.jpgSource of graphic: online version of the WSJ article quoted and cited below.



(p. A10) This year, researchers in Spain studied more than 200 online retailers and found a handful of examples of price differences--including at Staples within Massachusetts--that appeared to be based on location and other factors. Those findings suggest that Staples' price adjustments have been present at least since this summer.

It is difficult for online shoppers to know why, or even if, they are being offered different deals from other people. Many sites switch prices at lightning speed in response to competitors' offerings and other factors, a practice known as "dynamic pricing." Other sites test different prices but do so without regard to the buyer's characteristics.

To find differences that weren't purely the result of dynamic pricing or randomized tests, the Journal conducted preliminary scans by simulating visits from different computers to a variety of e-commerce sites. If a website showed different prices or offers, the Journal then analyzed the site's computer code and conducted follow-up testing.

The Journal's tests, which were conducted in phases between August and December, indicated that some big-name retailers are experimenting with offering different prices and products to different users.

Some sites, for example, gave discounts based on whether or not a person was using a mobile device. A person searching for hotels from the Web browser of an iPhone or Android phone on travel sites Orbitz and CheapTickets would see discounts of as much as 50% off the list price, Orbitz said.


. . .


At home-improvement site Lowe's Cos., . . . prices depend on location. For example, a refrigerator in the Journal's tests cost $449 in Chicago, Los Angeles and Ashburn, Va., but $499 in seven other test cities. Lowe's said online shoppers receive the lower of the online store price or the price at their local Lowe's store as indicated by their ZIP Code.

Home Depot's website offered price variations that appeared to be based on the nearest brick-and-mortar store as well. A 250-foot spool of electrical wiring fell into six pricing groups, including $70.80 in Ashtabula, Ohio; $72.45 in Erie, Pa.; $75.98 in Olean, N.Y and $77.87 in Monticello, N.Y.


. . .


The differences found on the Staples website presented a complex pricing scheme. The Journal simulated visits to Staples.com from all of the more than 42,000 U.S. ZIP Codes, testing the price of a Swingline stapler 20 times in each. In addition, the Journal tested more than 1,000 different products in 10 selected ZIP Codes, 10 times in each location.

The Journal saw as many as three different prices for individual items. How frequently a simulated visitor saw low and high prices appeared to be tied to the person's ZIP Code. Testing suggested that Staples tries to deduce people's ZIP Codes by looking at their computer's IP address. This can be accurate, but isn't foolproof.

In the Journal's tests, ZIP Codes whose center was farther than 20 miles from a Staples competitor saw higher prices 67% of the time. By contrast, ZIP Codes within 20 miles of a rival saw the high price least often, only 12% of the time.



For the full story, see:

JENNIFER VALENTINO-DEVRIES, JEREMY SINGER-VINE and ASHKAN SOLTANI. "Websites Vary Prices, Deals Based on Users' Information." The Wall Street Journal (Mon., December 24, 2012): A1 & A10.

(Note: ellipses added.)






December 30, 2012

"The Arpanet Was Not an Internet"



XeroxParcSign2012-12-18.jpg "Xerox PARC headquarters." Source of caption and photo: online version of the WSJ article quoted and cited below.


(p. A11) A telling moment in the presidential race came recently when Barack Obama said: "If you've got a business, you didn't build that. Somebody else made that happen." He justified elevating bureaucrats over entrepreneurs by referring to bridges and roads, adding: "The Internet didn't get invented on its own. Government research created the Internet so that all companies could make money off the Internet."


. . .


Robert Taylor, who ran the ARPA program in the 1960s, sent an email to fellow technologists in 2004 setting the record straight: "The creation of the Arpanet was not motivated by considerations of war. The Arpanet was not an Internet. An Internet is a connection between two or more computer networks."

If the government didn't invent the Internet, who did? Vinton Cerf developed the TCP/IP protocol, the Internet's backbone, and Tim Berners-Lee gets credit for hyperlinks.

But full credit goes to the company where Mr. Taylor worked after leaving ARPA: Xerox. It was at the Xerox PARC labs in Silicon Valley in the 1970s that the Ethernet was developed to link different computer networks. Researchers there also developed the first personal computer (the Xerox Alto) and the graphical user interface that still drives computer usage today.

According to a book about Xerox PARC, "Dealers of Lightning" (by Michael Hiltzik), its top researchers realized they couldn't wait for the government to connect different networks, so would have to do it themselves. "We have a more immediate problem than they do," Robert Metcalfe told his colleague John Shoch in 1973. "We have more networks than they do." Mr. Shoch later recalled that ARPA staffers "were working under government funding and university contracts. They had contract administrators . . . and all that slow, lugubrious behavior to contend with."



For the full commentary, see:

Gordon Crovitz. "INFORMATION AGE; Who Really Invented the Internet?" The Wall Street Journal (Mon., July 23, 2012): A11.

(Note: ellipsis between paragraphs was added; ellipsis internal to last paragraph was in original.)

(Note: the online version of the commentary has the date July 22, 2012.)



I read the Hiltzik book several years ago, and my memory of it is not sharp, but I remember thinking that it was a useful book:

Hiltzik, Michael A. Dealers of Lightning: Xerox PARC and the Dawn of the Computer Age. New York: HarperBusiness, 1999.






December 21, 2012

Ellison and Jobs on Money



(p. 299) . . . Jobs and his family went to Hawaii for Christmas vacation. Larry Ellison was also there, as he had been the year (p. 300) before. "You know, Larry, I think I've found a way for me to get back into Apple and get control of it without you having to buy it," Jobs said as they walked along the shore. Ellison recalled, "He explained his strategy, which was getting Apple to buy NeXT, then he would go on the board and be one step away from being CEO." Ellison thought that Jobs was missing a key point. "But Steve, there's one thing I don't understand," he said. "If we don't buy the company, how can we make any money?" It was a reminder of how different their desires were. Jobs put his hand on Ellison's left shoulder, pulled him so close that their noses almost touched, and said, "Larry, this is why it's really important that I'm your friend. You don't need any more money."

Ellison recalled that his own answer was almost a whine: "Well, I may not need the money, but why should some fund manager at Fidelity get the money? Why should someone else get it? Why shouldn't it be us?"

"I think if I went back to Apple, and I didn't own any of Apple, and you didn't own any of Apple, I'd have the moral high ground," Jobs replied.

"Steve, that's really expensive real estate, this moral high ground," said Ellison. "Look, Steve, you're my best friend, and Apple is your company. I'll do whatever you want."



Source:

Isaacson, Walter. Steve Jobs. New York: Simon & Schuster, 2011.

(Note: ellipsis added.)






December 18, 2012

Poor People Want Washing Machines







The wonderful clip above is from Hans Rosling's TED talk entitled "The Magic Washing Machine."

He clearly and strongly presents his central message that the washing machine has made life better.



What was the greatest invention of the industrial revolution? Hans Rosling makes the case for the washing machine. With newly designed graphics from Gapminder, Rosling shows us the magic that pops up when economic growth and electricity turn a boring wash day into an intellectual day of reading.


Source of video clip summary:

http://www.ted.com/talks/hans_rosling_and_the_magic_washing_machine.html



The version of the clip above is embedded from YouTube, where it was posted by TED: http://youtu.be/BZoKfap4g4w

It can also be viewed at the TED web site at:

http://www.ted.com/talks/hans_rosling_and_the_magic_washing_machine.html



(Note: I am grateful to Robin Kratina for telling me about Rosling's TED talk,)

(Note: I do not agree with Rosling's acceptance of the politically correct consensus view that the response to global warning should mainly be mitigation and green energy---to the extent that a response turns out to be necessary, I mainly support adaptation, as suggested in many previous entries on this blog.)






December 13, 2012

"Did Alexander Graham Bell Do Any Market Research Before He Invented the Telephone?"



(p. 170) After the Macintosh team returned to Bandley 3 that afternoon, a truck pulled into the parking lot and Jobs had them all gather next to it. Inside were a hundred new Macintosh computers, each personalized with a plaque. "Steve presented them one at a time to each team member, with a handshake and a smile, as the rest of us stood around cheering," Hertzfeld recalled. It had been a grueling ride, and many egos had been bruised by Jobs's obnoxious and rough management style. But neither Raskin nor Wozniak nor Sculley nor anyone else at the company could have pulled off the creation of the Macintosh. Nor would it likely have emerged from focus groups and committees. On the day he unveiled the Macintosh, a reporter from Popular Science asked Jobs what type of market research he had done. Jobs responded by scoffing, "Did Alexander Graham Bell do any market research before he invented the telephone?"


Source:

Isaacson, Walter. Steve Jobs. New York: Simon & Schuster, 2011.

(Note: italics in original.)






December 11, 2012

Health Care Costs Can Be Lowered by Less Waste and More Cost-Reducing Innovation



(p. 234) Melinda Beeuwkes Buntin and David Cutler discuss "The Two Trillion Dollar Solution: Saving Money by Modernizing the Health Care System." "Two sorts of savings are possible in health care. The first is eliminating waste and inefficiency. The most commonly cited estimate is that 30 percent of the money spent on medical care does not buy care worth its cost. Medicare costs per capita in Minneapolis, for example, are about half those in Miami, yet Miami does not have better health outcomes. International comparisons yield the same conclusion. . . . Second, reform might stimulate cost-reducing innovation instead of the continuous cost increases that accompany current innovation. For nearly 20 years, scholars have argued that generous reimbursement policies for medical care have led to innovations that almost always increase health care costs. Changing that dynamic by investing in research about what works and rewarding health care providers who choose efficient treatments could have a dramatic effect on cost growth. . . . Reducing costs by 30 percent will take time and effort, but it is not inconceivable over the long term. Experience in the health care sector and other industries suggests that cost reductions on the order of 1.5-to-2.0 percentage points per year are within reach."


Buntin and Cutler as quoted in:

Taylor, Timothy. "Recommendations for Further Reading." Journal of Economic Perspectives 24, no. 2 (Fall 2009): 231-38.

(Note: ellipses in original.)


The Buntin and Cutler report is:

Buntin, Melinda Beeuwkes, and David Cutler. "The Two Trillion Dollar Solution: Saving Money by Modernizing the Health Care System." Washington, D.C.: Center for American Progress, 2009.






December 10, 2012

With Scorned Ideas, and Without College, Inventor and Entrepreneur "Ovshinsky Prevailed"



OvshinskyStanfordAndiris2012-12-01.jpg









"Stanford R. Ovshinsky and Iris M. Ovshinsky founded Energy Conversion Laboratories in 1960." Source of caption and photo: online version of the NYT obituary quoted and cited below.




(p. A23) Stanford R. Ovshinsky, an iconoclastic, largely self-taught and commercially successful scientist who invented the nickel-metal hydride battery and contributed to the development of a host of devices, including solar energy panels, flat-panel displays and rewritable compact discs, died on Wednesday [October 17, 2012] at his home in Bloomfield Hills, Mich. He was 89.


. . .


His ideas drew only scorn and skepticism at first. He was an unknown inventor with unconventional ideas, a man without a college education who made his living designing automation equipment for the automobile industry in Detroit, far from the hotbeds of electronics research like Silicon Valley and Boston.

But Mr. Ovshinsky prevailed. Industry eventually credited him for the principle that small quantities or thin films of amorphous materials exposed to a charge can instantly reorganize their structures into semicrystalline forms capable of carrying significant current.


. . .


In 1960, he and his second wife, the former Iris L. Miroy, founded Energy Conversion Laboratories in Rochester Hills, Mich., to develop practical products from the discovery. It was renamed Energy Conversion Devices four years later.

Energy Conversion Devices and its subsidiaries, spinoff companies and licensees began translating Mr. Ovshinsky's insights into mechanical, electronic and energy devices, among them solar-powered calculators. His nickel-metal battery is used to power hybrid cars and portable electronics, among other things.

He holds patents relating to rewritable optical discs, flat-panel displays and electronic-memory technology. His thin-film solar cells are produced in sheets "by the mile," as he once put it.


. . .


"His incredible curiosity and unbelievable ability to learn sets him apart," Hellmut T. Fritzsche, a longtime friend and consultant, said in an interview in 2005.



For the full obituary, see:

BARNABY J. FEDER. "Stanford R. Ovshinsky Dies at 89, a Self-Taught Maverick in Electronics." The New York Times (Fri., October 19, 2012): A23.

(Note: ellipses and bracketed date added.)

(Note: the online version of the article was dated October 18, 2012.)

(Note: in the first sentence of the print version, "hybrid" was used instead of the correct "hydride.")






December 4, 2012

Isaacson's "Steve Jobs" Tells Us Much About the Innovative Project Entrepreneur



walter-isaacson-steve-jobsBD2012-12-01.png








Source of book image: http://www.internetmonk.com/wp-content/uploads/walter-isaacson-steve-jobs1.png






Steve Jobs is one of my favorite examples of what I call the "project entrepreneur." Walter Isaacson has written a fascinating biography of Jobs, full of memorable examples for any student of the innovative entrepreneur.

During the next few weeks, I will occasionally add entries that quote some of the more important or thought-provoking passages.



The book under review is:

Isaacson, Walter. Steve Jobs. New York: Simon & Schuster, 2011.






December 1, 2012

Online Employers Treat Workers More Honestly and Fairly than In-person Employers



(p. 233) John J. Horton surveys "The Condition of the Turking Class: Are Online Employers Fair and Honest?" Amazon Mechanical Turk is a "marketplace for work," as explained at <https://www.mturk.com/mturk/welcome>. Employers post "Human Intelligence Tasks," which can be tasks like writing keywords that accompany photos or writing bogus product reviews, and workers anywhere in the world can sign up to do them. Horton used Mechanical Turk to survey 200 respondents, who were paid 12 cents apiece for responding to a survey. Of the respondents, 111 were Americans, 58 from India, and the others from other countries. When asked what percentage of employers in their home country treat workers honestly and fairly, the average answer was 64 percent; in comparison, when asked what percentage of Mechanical Turk Requestors treated them (p. 234) fairly, the median answer was 69 percent.


Source:

Taylor, Timothy. "Recommendations for Further Reading." Journal of Economic Perspectives 24, no. 2 (Spring 2010): 227-34.

(Note: ellipses in original.)


The published version of the article summarized by Taylor is:

Horton, John J. "The Condition of the Turking Class: Are Online Employers Fair and Honest?" Economics Letters 111, no. 1 (April 2011): 10-12.






November 26, 2012

American Innovators Created Synergies and Interchangeable Parts



TheDawnOfInnovationBK2012-11-20.jpg











Source of book image: online version of the WSJ review quoted and cited below.








(p. A13) . . . the post-Civil War industrialization had an important and largely overlooked predecessor in the first decades of the 19th century, when, as Charles Morris writes in "The Dawn of Innovation," "the American penchant for mechanized, large-scale production spread throughout industry, presaging the world's first mass-consumption economy." It is a story well worth telling, and Mr. Morris tells it well.


. . .


Whole industries sprang up as the country's population boomed and spilled over into the Middle West. The rich agricultural lands there produced huge surpluses of grain and meat, especially pork. The city of Cincinnati--whose population grew to 160,000 in 1860, from 2,500 in 1810--became known as "Porkopolis" because of the number of hogs its slaughterhouses processed annually.

Mr. Morris does a particularly good job of explaining the crucial importance of synergy in economic development, how one development leads to another and to increased growth. The lard (or pig fat) from the slaughterhouses, he notes, served as the basis for the country's first chemical industry. Lard had always been used for more than pie crust and frying. It was a principal ingredient in soap, which farm wives made themselves, a disagreeable and even dangerous task thanks to the lye used in the process.

But when lard processing was industrialized to make soap, it led to an array of byproducts such as glycerin, used in tanning and in pharmaceuticals. Stearine, another byproduct, made superior candles. Just in the decade from the mid-1840s to the mid-1850s, Cincinnati soap exports increased 20-fold, as did the export of other lard-based products. Procter & Gamble, founded in Cincinnati in 1837 by an Irish soap maker and an English candle maker who had married sisters, grew into a giant company as the fast-rising middle class sought gentility.

Mr. Morris goes into great detail on the development of interchangeable parts--the system of making the components of a manufactured product so nearly identical that they can be easily substituted and replaced.



For the full review, see:

John Steele Gordon. "BOOKSHELF; The Days Of Porkopolis." The Wall Street Journal (Tues., November 20, 2012): A13.

(Note: ellipses added.)

(Note: the online version of the article was updated November 19, 2012.)



The book under review, is:

Morris, Charles R. The Dawn of Innovation: The First American Industrial Revolution. Philadelphia, PA: PublicAffairs, 2012.






November 12, 2012

Edison Foresaw Phonograph Music Potential



EdisonWangemannGroupPhoto2012-11-11.jpg "EUROPEAN JOURNEY; Thomas Edison, seated center, sent Adelbert Theodor Edward Wangemann, standing behind him, to France in 1889. From there Wangemann traveled to Germany to record recitations and performances." Source of caption and photo: online version of the NYT article quoted and cited below.



Edison is often ridiculed for failing to foresee that playing music would be a major use for his phonograph invention. (Nye 1991, p. 142 approvingly references Hughes 1986, p. 201 on this point.) But if Edison failed to foresee, then why did he assign Wangemann to make the phonograph "a marketable device for listening to music"?



(p. D3) Tucked away for decades in a cabinet in Thomas Edison's laboratory, just behind the cot in which the great inventor napped, a trove of wax cylinder phonograph records has been brought back to life after more than a century of silence.

The cylinders, from 1889 and 1890, include the only known recording of the voice of the powerful chancellor Otto von Bismarck. . . . Other records found in the collection hold musical treasures -- lieder and rhapsodies performed by German and Hungarian singers and pianists at the apex of the Romantic era, including what is thought to be the first recording of a work by Chopin.


. . .


The lid of the box held an important clue. It had been scratched with the words "Wangemann. Edison."

The first name refers to Adelbert Theodor Edward Wangemann, who joined the laboratory in 1888, assigned to transform Edison's newly perfected wax cylinder phonograph into a marketable device for listening to music. Wangemann became expert in such strategies as positioning musicians around the recording horn in a way to maximize sound quality.

In June 1889, Edison sent Wangemann to Europe, initially to ensure that the phonograph at the Paris World's Fair remained in working order. After Paris, Wangemann toured his native Germany, recording musical artists and often visiting the homes of prominent members of society who were fascinated with the talking machine.

Until now, the only available recording from Wangemann's European trip has been a well-known and well-worn cylinder of Brahms playing an excerpt from his first Hungarian Dance. That recording is so damaged "that many listeners can scarcely discern the sound of a piano, which has in turn tarnished the reputations of both Wangemann and the Edison phonograph of the late 1880s," Dr. Feaster said. "These newly unearthed examples vindicate both."



For the full story, see:

RON COWEN. "Restored Edison Records Revive Giants of 19th-Century Germany." The New York Times (Tues., January 31, 2012): D3.

(Note: ellipses added.)

(Note: the online version of the article is dated January 30, 2012.)



EdisonPhonograph2012-11-11.jpg "Adelbert Theodor Edward Wangemann used a phonograph to record the voice of Otto von Bismarck." Source of caption and photo: online version of the NYT article quoted and cited above.






November 7, 2012

Health Inefficiencies Free-Ride on "Home Run Innovations"



The article quoted below is a useful antidote to those economists who sometimes seem to argue that health gains fully justify the rise in health costs.


(p. 645) In the United States, health care technology has contributed to rising survival rates, yet health care spending relative to GDP has also grown more rapidly than in any other country. We develop a model of patient demand and supplier behavior to explain these parallel trends in technology growth and cost growth. We show that health care productivity depends on the heterogeneity of treatment effects across patients, the shape of the health production function, and the cost structure of procedures such as MRIs with high fixed costs and low marginal costs. The model implies a typology of medical technology productivity: (I) highly cost-effective "home run" innovations with little chance of overuse, such as anti-retroviral therapy for HIV, (II) treatments highly effective for some but not for all (e.g., stents), and (III) "gray area" treatments with uncertain clinical value such as ICU days among chronically ill patients. Not surprisingly, countries adopting Category I and effective Category II treatments gain the greatest health improvements, while countries adopting ineffective Category II and Category III treatments experience the most rapid cost growth. Ultimately, economic and political resistance in the United States to ever-rising tax rates will likely slow cost growth, with uncertain effects on technology growth.


Source of abstract:

Chandra, Amitabh, and Jonathan Skinner. "Technology Growth and Expenditure Growth in Health Care." Journal of Economic Literature 50, no. 3 (Sept. 2012): 645-80.







October 31, 2012

Thiel Fellows Avoid Formal Education to Pursue Entrepreneurial Projects



FullEdenTh ielFellowSolarPanel2012-10-12.jpg












"Eden Full, 20, tested her rotating solar panel in Kenya in 2010." Source of caption and photo: online version of the NYT article quoted and cited below.




(p.1) EDEN FULL should be back at Princeton by now. She should be hustling to class, hitting the books, acing tests. In short, she should be climbing that old-school ladder toward a coveted spot among America's future elite.

She isn't doing any of that. Instead, Ms. Full, as bright and poised and ambitious as the next Ivy Leaguer, has done something extraordinary for a Princetonian: she has dropped out.

It wasn't the exorbitant cost of college. (Princeton, all told, runs nearly $55,000 a year.) She says she simply received a better offer -- and, perhaps, a shot at a better education.

Ms. Full, 20, is part of one of the most unusual experiments in higher education today. It rewards smart young people for not going to college and, instead, diving into the real world of science, technology and business.

The idea isn't nuts. After all, Bill Gates and Steve Jobs dropped out, and they did O.K.

Of course, their kind of success is rare, degree or no degree. Mr. Gates and Mr. Jobs changed the world. Ms. Full wants to, as well, and she's in a hurry. She has built a low-cost solar panel and is starting to test it in Africa.

"I was antsy to get out into the world and execute on my ideas," she says.

At a time when the value of a college degree is being called into question, and when job prospects for many new graduates are grimmer than they've been in years, perhaps it's no surprise to see a not-back-to-school movement spring up. What is surprising is where it's springing up, and who's behind it.

The push, which is luring a handful of select students away from the likes of Princeton, Harvard and M.I.T., is the brainchild of Peter A. Thiel, 44, a billionaire and freethinker with a remarkable record in Sil-(p. 7)icon Valley. Back in 1998, during the dot-com boom, Mr. Thiel gambled on a company that eventually became PayPal, the giant of online payments. More recently, he got in early on a little start-up called Facebook.

Since 2010, he has been bankrolling people under the age of 20 who want to find the next big thing -- provided that they don't look for it in a college classroom. His offer is this: $50,000 a year for two years, few questions asked. Just no college, unless a class is helpful for their Thiel projects.


. . .


Ms. Full is friends with another Thiel fellow, Laura Deming, 18. Ms. Deming is clearly brilliant. When she was 12, her family moved to San Francisco from New Zealand so she could work with Cynthia Kenyon, a molecular biologist who studies aging. When Ms. Deming was 14, the family moved again, this time to the Boston area, so she could study at M.I.T.

"Families of Olympic-caliber athletes make these kinds of sacrifices all the time," says Tabitha Deming, Laura's mother. "When we lived nearby in Boston, we were lucky to see her once a month. She never came home for weekends."

John Deming, Laura's father, graduated from Brandeis University at the age of 35 but says he disdains formal education at every level. His daughter was home-schooled.

"I can't think of a worse environment than school if you want your kids to learn how to make decisions, manage risk and take responsibility for their choices," Mr. Deming, an investor, wrote in an e-mail. "Rather than sending them to school, turn your kids loose on the world. Introduce them to the rigors of reality, the most important of which is earning your own way." He added, "I detest American so-called 'education.' "

His daughter's quest to slow aging was spurred by her maternal grandmother, Bertie Deming, 85, who began having neuromuscular problems a decade ago. Laura, a first-year fellow, now spends her days combing medical journals, seeking a handful of researchers worth venture capital funding, which is a continuation of her earlier work.

"I'm looking for therapies that target aging damage and slow or reverse it," she says. "I've already spent six years on this stuff. So far I've found only a few companies, two or three I'm really bullish on."



For the full story, see:

CAITLIN KELLY. "Drop Out, Dive In, Start Up.." The New York Times, SundayBusiness (Sun., September 16, 2012): 1 & 7.

(Note: ellipsis added.)

(Note: the online version of the article is dated September 15, 2012, and had he title "Forgoing College to Pursue Dreams.")



DemingLauraThielFellow2012-10-12.jpg "Laura Deming, left, at age 6 with her grandmother, whose neuromuscular problems have now inspired Laura to work on anti-aging technology." Source of caption and photo: online version of the NYT article quoted and cited above.






October 20, 2012

Much Innovation Has "Nothing to Do with Science--It's Just Creative Mankind Chipping Away at Things"



(p. 122) VANE and MULHEARN: The prize rewards specific discoveries, achievements, or breakthroughs in economic science. Your pioneering contributions have opened up a rich seam of research for others to mine. Does academic knowledge largely progress through the lead taken by a small number of creative innovators?
PHELPS: That's such a good question. It resonates with a subject in the area of innovation theory. The old guys like Arthur Spiethoff thought that progress was due to the great discoveries of the scientists and navigators. Schumpeter (1934) (p. 123) didn't depart altogether from that, he simply said, well, that's right but you've got to have some entrepreneur to actually implement it. But don't think there's much creativity there--everybody knows what's in the air. And it's very rare that anything new really gets created in the course of this development work. But now we don't think about innovation in that way so much. We recognize that once in a while there is a big leap which creates the ground for a surge of innovations to follow. Nowadays we realize that an awful lot of innovation just comes from business people operating at the grass roots having ideas on the basis of what they see around them. Nothing to do with science--it's just creative mankind chipping away at things. I know that the Sens and the Mundells and the Lucases are towering figures, but they couldn't have become so if they hadn't read a lot of papers by, well, pretty average people who are just doing a good job of exploring a question and giving inspiration. I guess the towering figures are people with just a little more drive, a little more imagination, just a little cleverer in putting some things together. In other words, I don't know the answer to the question [laughter].


For the full interview, from which the above is quoted, see:

Vane, Howard R., and Chris Mulhearn, interviewers. "Interview with Edmund S. Phelps." Journal of Economic Perspectives 23, no. 3 (Summer 2009): 109-24.






October 4, 2012

Skilled Immigrants Increase U.S. Patents



(p. 31) We measure the extent to which skilled immigrants increase innovation in the United States. The 2003 National Survey of College Graduates shows that immigrants patent at double the native rate, due to their disproportionately holding science and engineering degrees. Using a 1940-2000 state panel, we show that a 1 percentage point increase in immigrant college graduates' population share increases patents per capita by 9-18 percent. Our instrument for the change in the skilled immigrant share is based on the 1940 distribution across states of immigrants from various source regions and the subsequent national increase in skilled immigration from these regions.


For the full article, from which the above abstract is quoted, see:

Hunt, Jennifer, and Marjolaine Gauthier-Loiselle. "How Much Does Immigration Boost Innovation?" American Economic Journal: Macroeconomics 2, no. 2 (April 2010): 31-56.






August 27, 2012

Overly Optimistic Entrepreneurs Seek Government Support for Projects that Will Usually Fail




People have a right to be overly-optimistic when they invest their own money in entrepreneurial projects. But governments should be prudent caretakers of the money they have taken from taxpayers. The overly-optimistic bias of subsidy-seeking entrepreneurs weakens the case for government support of entrepreneurial projects.


(p. 259) The optimistic risk taking of entrepreneurs surely contributes to the economic dynamism of a capitalistic society, even if most risk takers end up disappointed. However, Marta Coelho of the London School of Economics has pointed out the difficult policy issues that arise when founders of small businesses ask the government to support them in decisions that are most likely to end badly. Should the government provide loans to would-be entrepreneurs who probably will bankrupt themselves in a few years? Many behavioral economists are comfortable with the "libertarian paternalistic" procedures that help people increase their savings rate beyond what they would do on their own. The question of whether and how government should support small business does not have an equally satisfying answer.


Source:

Kahneman, Daniel. Thinking, Fast and Slow. New York: Farrar, Straus and Giroux, 2011.





August 26, 2012

Decouple Learning from Credentialing



HennessyKhan2012-08-20.jpg



"JOHN HENNESSY: 'There's a tsunami coming.' [At left] . . . , John Hennessy & Salman Khan." Source of caption and photo: online version of the WSJ article quoted and cited below.



(p. R8) Is there anything to be done about the rising price of higher education? That was the question posed to John Hennessy, president of Stanford University, and Salman Khan, founder of Khan Academy, a nonprofit online-learning organization. They sat down with The Wall Street Journal's Walt Mossberg to discuss how technology might be part of the solution.

Here are edited excerpts of their conversation.


. . .


MR. MOSSBERG: You have a lot of money at Stanford. I've been, until recently, a trustee of Brandeis University. It's a very good university. It charges about what you do. But it doesn't have your money, and there are a lot of colleges like that.

MR. HENNESSY: Agreed, and if you look at the vast majority of colleges in the U.S., there are way too many that are [dependent on tuition to fund their budgets]. That is not sustainable. We have to do something to bend the cost curve, and this is where technology comes in.

MR. KHAN: On the sustainability question, I agree. I think the elites will probably do just fine, but for the bulk of universities, nothing can grow 5% faster than inflation forever. It will just take over the world, and that's what's happening now.

There is a fundamental disconnect happening between the providers of education and the consumers of education. If you ask universities what they are charging the $60,000 for, they'll say, "Look at our research facilities. Look at our faculty. Look at the labs and everything else." And then if you ask the parents and the students why they are taking on $60,000 of debt, they'll say, "Well, I need the credential. I need a job."

So one party thinks they're selling a very kind of an enriching experience, and the other one thinks that they're buying a credential. And if you ask the universities what percentages of your costs are "credentialing," they say oh, maybe 5% to 10%. And so I think there's an opportunity if we could decouple those things--if the credentialing part could happen for significantly less.

MR. MOSSBERG: What do you mean by the credentialing part?

MR. KHAN: If you think about what education is, it's a combination. There's a learning part. You learn accounting, you learn to write better, to think, whatever. Then there is a credentialing part, where I'm going to hand you something that you can go take into the market and signal to people that you know what you're doing.

Right now they're very muddled, but this whole online debate or what's happening now is actually starting to clarify things. At Khan Academy we're 100% focused on the learning side of things. And I think it would be interesting [if credentials could be earned based on what you know and not on where you acquired that knowledge].



For the full interview, see:

Walt Mossberg, interviewer. "Changing the Economics of Education; John Hennessy and Salman Khan on how technology can make the college numbers add up." The Wall Street Journal (Mon., June 4, 2012): R8.

(Note: bracketed words in caption, and ellipses, added; bold and italics in original.)






August 13, 2012

Revolutionary Entrepreneurs Need "Unbridled Confidence and Arrogance"



(p. B1) Will there be another?

It's a bit absurd to try to identify "the next Steve Jobs." Two decades ago, Mr. Jobs himself wouldn't even have qualified. Exiled from Apple Inc., . . . Mr. Jobs was then hoping to revive his struggling computer maker, NeXT Inc. . . .

But just as Mr. Jobs followed Henry Ford and Thomas Edison, there will some day be another innovator with the vision, drive and disdain of the status quo to spark, and then direct, big changes in how we live.


. . .


"You have to try the unreasonable," says Vinod Khosla, a co-founder of Sun Microsystems Inc., who, as a longtime venture capitalist, has seen thousands of would-be revolutionaries. Two key characteristics, Mr. Khosla says: "unbridled confidence and arrogance."



For the full story, see:

SCOTT THURM and STU WOO. "Who Will Be the 'Next Steve Jobs'?" The Wall Street Journal (Sat., October 8, 2011): B1 & B3.

(Note: ellipses added.)





July 31, 2012

Richard Posner Seeks to Limit and Reform the Patent System



PosnerRichard2012-07-20.jpg













"Judge Richard Posner." Source of caption and photo: online version of the WSJ article quoted and cited below.





I am deeply conflicted about patents. On the one hand, property rights are important, both ethically and in terms of economic incentives. On the other hand, patents seem to restrict innovation.

The views of Posner are worth serious consideration. My own current view is that the patent rules need to be reformed and their implementation made more efficient. But I do not think the patent system should be abolished.


(p. B1) While technology companies continue to fight over smartphone patents, one judge has fought his way into the ring.

He is 73-year-old Richard Posner, among the most potent forces on the federal bench and an outspoken critic of the patent system.

Presiding over a lawsuit between Apple Inc. . . . and Google Inc.'s . . . Motorola Mobility in June, he dropped a bombshell, scrapping the entire case and preventing the companies from refiling their claims. The ruling startled the litigants in the case and fueled a national discussion about whether the patent system (p. B5) is broken.


. . .


In the June ruling, explaining why he wouldn't ban Motorola products from the shelves, Judge Posner said: "An injunction that imposes greater costs on the defendant than it confers benefits on the plaintiff reduces net social welfare."

Judge Posner, who declined to be interviewed for this article, has continued to press the issue.

This month, he wrote an essay in the Atlantic headlined, "Why There Are Too Many Patents In America." He said "most industries could get along fine without patent protection" and that the U.S. Patent and Trademark Office has done a woeful job, calling it "understaffed," and "many patent examinations...perfunctory."

He saved ammunition for juries and fellow jurists. "Judges have difficulty understanding modern technology and jurors have even greater difficulty," he wrote. He suggested several reforms to the patent system, including shortening the patent term for inventors in some industries and expanding the authority of the Patent and Trademark Office to try patents cases.


. . .


Judge Posner's intellectual curiosity is well-known and "people assume he has no political ax to grind because he's not trying to advance the fortunes of any particular segment of the economy," said Arthur D. Hellman, a law professor at University of Pittsburgh who studies the judiciary.

Yet his ruling poses a difficult question for the Federal Circuit Court of Appeals, the specialized one that handles intellectual property cases, about whether infringement matters without damages.

Peter Menell, a law professor at UC Berkeley, likened it to the old thought experiment that begins "If a tree falls in the woods." He said: "If there are no damages, do you need to have a trial?"

Juge Posner also rejected Google's bid to block the sale of iPhones that allegedly infringed a so-called "standards-essential patent" owned by Google. Standards-essential patents protect innovations used in technologies that industries collectively agree to use, like Wi-Fi or 3G. A company that holds one of these patents stands to profit enormously, because its competitors have to pay it for licenses to use the technology.

But Judge Posner ruled that holders of such patents aren't entitled to injunctions. Michael Carrier, a law professor at Rutgers University, Camden, said the opinion on standards-essential patents came amid a groundswell of opposition to injunctions for such patents and could put an end to the practice among U.S. federal judges.



For the full story, see:

JOE PALAZZOLO and ASHBY JONES. "Also on Trial: A Judge's Worldview." The Wall Street Journal (Tues., July 24, 2012): B1 & B5.

(Note: all ellipses were added except for the one internal to the quote from Judge Posner's Atlantic blog posting.)

(Note: the online version of the article has the date July 23, 2012 and has the title "Apple and Samsung Patent Suit Puts Judge Posner's Worldview on Trial." The print version of the title could be interpreted as a sub-title of the main title to the accompanying adjacent article. The title of the main article was "Apple v. Samsung; In Silicon Valley, Patents Go on Trial." The last two paragraphs above appear only in the online, but not in the print, version of the article.)


The Atlantic blog posting by Posner can be found at:

Posner, Richard A. "Why There Are Too Many Patents in America." In The Atlantic blog, posted on July 12, 2012 at: http://www.theatlantic.com/business/archive/2012/07/why-there-are-too-many-patents-in-america/259725/.

(Note: the WSJ article above implies that the Posner essay was published in the print version of The Atlantic, but I can only find it in Posner's blog on The Atlantic web site.)






July 27, 2012

Edison Was Great Inventor; "Jobs Was the Far Shrewder Businessman"



EdisonThomasAlva2012-06-22.jpg "Thomas Alva Edison." Source of caption and photo: online version of the NYT article quoted and cited below.



I have not read Stross' books on Jobs and Edison. According to some of the Amazon reviews of the Jobs book, back in 1993 Stross was much more critical of Jobs than he is in the piece below:



(p. 4) I wrote a book about Mr. Jobs in 1993.


. . .


Years later, I wrote a biography of Edison, a person whom Mr. Jobs admired. When you compare the two personalities and their careers, a few similarities emerge immediately. Both had less formal schooling than most of their respective peers. Both possessed the ability to visualize projects on a grand scale. Both followed an inner voice when making decisions. And both had terrific tempers that could make their employees quake.


. . .


Mr. Jobs was the far shrewder businessman, even if he never talked about wealth as a matter of personal interest. When Edison died, he left behind an estate valued at about $12 million, or about $180 million in today's dollars. His friend Henry Ford had once joked that Edison was "the world's greatest inventor and the world's worst businessman." Mr. Jobs was worth a commanding $6.5 billion.

Mr. Jobs was perhaps the most beloved billionaire the world has ever known. Richard Branson's tribute captures the way people felt they could identify with Mr. Jobs's life narrative: "So many people drew courage from Steve and related to his life story: adoptees, college dropouts, struggling entrepreneurs, ousted business leaders figuring out how to make a difference in the world, and people fighting debilitating illness. We have all been there in some way and can see a bit of ourselves in his personal and professional successes and struggles."



For the full commentary, see:

RANDALL STROSS. "The Power of Taking the Big Chance." The New York Times, SundayBusiness Section (Sun., October 9, 2011): 4.

(Note: online version of the commentary is dated October 8, 2011, and has the title "The Wizard and the Mortal: Two Sides of Genius.")

(Note: in the print version, the same title, on the same page, was used as heading for two different articles on Steve Jobs--Lohr's on the left side, and Stross' on the right side.)


Stross' books on Jobs and Edison are:

Stross, Randall E. Steve Jobs & the Next Big Thing. New York: Scribner Publishers, 1993.

Stross, Randall E. The Wizard of Menlo Park: How Thomas Alva Edison Invented the Modern World. New York: Crown Publishers, 2007.






July 23, 2012

Alexander Field Claims 1930s Were "Technologically Progressive"



GreatLeapForwardBK2012-06-22.jpg
















Source of book image: http://yalepress.yale.edu/images/full13/9780300151091.jpg



(p. 1) UNDERNEATH the misery of the Great Depression, the United States economy was quietly making enormous strides during the 1930s. Television and nylon stockings were invented. Refrigerators and washing machines turned into mass-market products. Railroads became faster and roads smoother and wider. As the economic historian Alexander J. Field has said, the 1930s constituted "the most technologically progressive decade of the century."


. . .


(p. 6) The closest thing to a unified explanation for these problems is a mirror image of what made the 1930s so important. Then, the United States was vastly increasing its productive capacity, as Mr. Field argued in his recent book, "A Great Leap Forward." Partly because the Depression was eliminating inefficiencies but mostly because of the emergence of new technologies, the economy was adding muscle and shedding fat. Those changes, combined with the vast industrialization for World War II, made possible the postwar boom.

In recent years, on the other hand, the economy has not done an especially good job of building its productive capacity. Yes, innovations like the iPad and Twitter have altered daily life. And, yes, companies have figured out how to produce just as many goods and services with fewer workers. But the country has not developed any major new industries that employ large and growing numbers of workers.



For the full commentary, see:

DAVID LEONHARDT. "The Depression: If Only Things Were That Good." The New York Times, SundayReview Section (Sun., October 9, 2011): 1 & 6.

(Note: ellipsis added.)

(Note: online version of the commentary is dated October 8, 2011.)


Book discussed:

Field, Alexander J. A Great Leap Forward: 1930s Depression and U.S. Economic Growth, Yale Series in Economic and Financial History. New Haven, CT: Yale University Press, 2011.






July 21, 2012

Technology Allows Start-Ups to Launch with Fewer Employees



HarelAndShilonOfBiteHunter2012-06-22.jpg "Start-up BiteHunter launched with three employees. Above, co-founders Gil Harel, left, and Ido Shilon." Source of caption and photo: online version of the WSJ article quoted and cited below.



Lower costs to entry means more start-ups and that means more innovation, ceteris paribus. All good. For the labor market, there will be fewer initial jobs per start-up. But there will be more start-ups, and more opportunity for erstwhile laborers to themselves become entrepreneurs. So maybe still all good.



(p. B5) New businesses are getting off the ground with nearly half as many workers as they did a decade ago, as the spread of online tools and other resources enables start-ups to do more with less.

The change, which began before the recession, may be permanent, according to some analysts.


. . .


Rather than purchasing the tools and manpower needed to run their companies, more small firms are renting, sharing or outsourcing resources, typically through online services, according to Steve King, a partner at Emergent Research, a research and consulting firm for small businesses.


. . .


Last year, Gil Harel launched BiteHunter, a search engine for restaurant discounts, with just three employees. Based in New York, the site used shared screens and other communications tools to work with developers in Russia, Uruguay and Israel.

"Just to build the infrastructure to get a business off the ground used to take a lot of money and people. But things that you couldn't do in the past, you can now do on your own," Mr. Harel says.



For the full story, see:

ANGUS LOTEN. "With New Technology, Start-Ups Go Lean; Web-Based Services Mean Fewer Workers Needed." The Wall Street Journal (Thurs., September 15, 2011): B5.

(Note: ellipses added.)






July 20, 2012

Innovation Depends Less on R&D Spending and More on "Talent, Process, Execution and Strategy"



(p. B1) In the world of R&D spending, more doesn't necessarily mean better. And R&D may not describe all the innovation that matters.

"I think the numbers are pretty useless," says Michael Schrage, a research fellow at MIT's Sloan School who has studied the subject. "What matters more is the kind of innovator you are. If it were really true that the people who spent the most on R&D were the most successful, we wouldn't be subsidizing General Motors ."

"There's no statistically significant relationship between how much a company spends on R&D and how they perform over time," adds Barry Jaruzelski of Booz & Co. "There's a set of people who just consistently seem to skin the cat better."


. . .


(p. B2) Booz & Co. in 2007 listed the biggest global corporate spenders of R&D. The top 10 were Toyota, Pfizer, Ford, Johnson & Johnson, DaimlerChrysler, General Motors, Microsoft, GlaxoSmithKline, Siemens and IBM.

Then it drew up a second list, a group of companies it called "high-leverage innovators" that returned the best financial performance for every dollar spent on R&D. Booz screened for companies that, over the five previous years, outperformed industry peers across seven measures--including profit, sales growth, and shareholder return--while also spending less on R&D as a percentage of sales than the median in their industries.

No company from the first list made the second list. (Winners included Adidas, Apple, Exxon, Google, Kobe Steel, Samsung and Tenneco.)

That disconnect essentially hasn't changed, says Mr. Jaruzelski. Winning at innovation "is all about talent, process, execution and strategy," he says. "That's given the U.S. a pretty strong advantage over time."

"Technology," he adds, "is not equal to innovation."



For the full commentary, see:

JOHN BUSSEY. "THE BUSINESS; Myths of the Big R&D Budget." The Wall Street Journal (Fri., June 15, 2012): B1-B2.

(Note: ellipsis added.)






July 19, 2012

Larry Page on Tesla, Commerce, and Changing the World







Funding is a key constraint for the innovative project entrepreneur. By "project entrepreneur" I mean the innovator who views money as a means to achieving the project, and not as an end in itself. In this brief clip from Page's 2007 AAAS talk, he discusses how as a 12 year-old reading Tesla's autobiography he almost cried at how Tesla's failure to commercialize his ideas limited his ability to change the world.


The Tesla autobiography is:

Tesla, Nikola. My Inventions: The Autobiography of Nikola Tesla. SoHo Books, 2012.






July 17, 2012

Web Expedites Labor Market for Small Projects



LangerAndBurksChore2012-06-22.jpg "Liz Langer helped John Burks retrieve his keys." Source of caption and photo: online version of the WSJ article quoted and cited below.


(p. A1) A new crop of websites and smartphone applications are allowing people to farm out chores to a growing army of temporary personal assistants. These micro-employees are taking the division of labor to once-unthinkable extremes.


. . .


(p. A14) Some investors see dollar signs. Zaarly Inc., an online marketplace for micro-labor and goods based in San Francisco, recently raised $14.1 million from Google Inc. GOOG -2.18% investor and venture-capital firm Kleiner Perkins Caufield & Byers. Actor Ashton Kutcher and clothing designer Marc Ecko have also put in money. In October, Hewlett-Packard Chief Executive Meg Whitman joined the company's board.

After launching six months ago, Zaarly is processing more than 1,000 transactions a week for jobs that cost around $50 a pop. Chief Executive and cofounder Bo Fishback, 33, says about half the requests involve tangible goods, and the rest involve some sort of service. One of his favorites: a person who hired someone to buy a Michael Jackson-themed dog costume for a puppy.

Sometimes the situation can be dire. John Burks, a 30-year-old actor who also runs an arts organization in Chicago, accidentally dropped his keys in a sewer during a rainstorm over the summer. To replace all the keys--including ones to his home, office and Mercedes--could cost well over $100.

After Googling "lost keys down sewer" to see what tactics others had used, Mr. Burks thought he could recover his keys with a fishing rod and a magnet, but had neither. His girlfriend at the time knew someone who worked at Zaarly, so he posted the job on its site. Liz Langer, a 27-year-old neuroscience graduate student and top Zaarly "fulfiller," spotted the job and within an hour arrived with the needed tools. Fifteen minutes later, they fished the keys out of the sewer. (Price: $80.)

"It's like stranger than fiction," Mr. Burks says. "I thought there was a very small chance that anything like that can happen."



For the full story, see:

EMILY GLAZER. "Serfing the Web: Sites Let People Farm Out Their Chores; Workers Choose Jobs, Negotiate Wages; Mr. Kutcher, Anonymously, Asks for Coffee." The Wall Street Journal (Mon., November 28, 2011): A1 & A14.

(Note: ellipsis added.)






July 16, 2012

"Why Would I Ever Need 10 Floppy Disks?"



Steven Johnson's early The Ghost Map is a wondrous story of a courageous medical entrepreneur who fairly single-handedly changes accepted wisdom on a hugely important issue (what causes disease). Steven Johnson's recent Where Ideas Come From provides a mechanical account that attributes new ideas to the inevitable exploration of "the adjacent possible," leaving little room for the great innovative entrepreneur.

It takes guts to contradict one's most recent book, and to contradict it so eloquently. So please join me in welcoming back the Steven Johnson of The Ghost Map:



(p. C3) In the fall of 1986, during the first week of my freshman year of college, my cousin took me to the university computer store to help me buy my first Macintosh. The Mac platform was two years old at that point, and Apple had just released a new machine called the Mac Plus that featured a then-staggering 1 megabyte of RAM. (In today's mileage, that would be just enough memory to store the first few verses of a Katy Perry song.) But the Mac did not yet offer a hard drive, and so my more tech-savvy cousin told me to buy a 10-pack of floppy disks as well.

I looked at him with astonishment. I was an art kid, not a techie. I needed a computer to write plays and short stories and term papers. The computer was just a tool, nothing more. "Why would I ever need 10 floppy disks?" I asked. "I just need one disk for my Microsoft Word files." My cousin smiled, knowing full well where I was headed. "Just buy the disks. Trust me."

He was right, of course, and to this day whenever I call him up to tell him about my latest computer purchase, with its terabytes of storage and gigabytes of memory, he laughs and says, "Just one disk. That's all I need."


. . .


The genius of famous innovators and CEOs is often exaggerated: Most fortunes are built on good fortune as much as sheer brilliance, and invention is a collaborative art. But there is no contesting the fact of Steve Jobs's genius--just a debate about its defining qualities.

I worry that we miss something in hailing him as either a master salesman or a master designer, though he is clearly both. His real gift, from an early age, has been the ability to see that these two worlds could, and should, productively collide. It isn't just that he made computers cool or put them in pretty boxes. It's that he put those computers in new conceptual boxes. A machine originally designed for processing equations and building bombs turned out to have a wonderful hidden potential: for song, laughter, poetry, community, family.


. . .


When I heard the news that he was stepping down from Apple, the image that flashed in my head was of a kid in a computer store trying to save a few bucks by skimping on floppy disks. I suspect my own story is not so unusual. There is, on the one hand, the simple, factual accounting of it: Steve Jobs persuaded me to buy a lot more than 10 disks over the years. But the other hand is so much more interesting: all the wonderful, unexpected things that he got me to put on those disks.



For the full commentary, see:

STEVEN JOHNSON. "THE GENIUS OF JOBS; Marrying Tech and Art; Steven Johnson on the magic of his first Mac--and how it changed his life." The Wall Street Journal (Sat., August 27, 2011): C3.

(Note: ellipses added.)






July 5, 2012

Steve Jobs Showed that Art and Commerce Could Be "Happy Bedfellows"



OldmanGary2012-06-22.jpg














Gary Oldman. Source of photo: online version of the NYT article quoted and cited below.







(p. 2) Gary Oldman is an English actor . . . widely known for his roles as Sirius Black in the "Harry Potter" film series and Jim Gordon in the Batman movies.


. . .


READING Right now I'm reading the Steve Jobs biography by Walter Isaacson. I love when people have a singleness of purpose and don't get dissuaded. I can connect with that. I can recognize it. I think a lot of artists have that. Art and commerce are not particularly happy bedfellows, but he was the exception.

I read quite a lot of biographies. I like nonfiction. The other book I'm carrying around with me at the moment is "River of Shadows: Eadweard Muybridge and the Technological Wild West" by Rebecca Solnit. It deals with the 19th century and the arrival of speed with the coming of the industrial age. We were very much governed by nature before; we were at the mercy of our own speed and horses and the like. It's interesting to think of living at that pace.



For the full interview, see:

KATE MURPHY. "DOWNLOAD; Gary Oldman." The New York Times, SundayReview Section (Sun., February 5, 2012): 2.

(Note: ellipses added; bold in original.)

(Note: online version of the interview is dated February 4, 2012.)






July 3, 2012

Our Cups Will Runneth Over If We Choose Entrepreneurship, Imagination, Will and Optimism



AbundanceBK2012-06-11.jpg



















Source of book image: http://www.abundancethebook.com/wp-content/uploads/2012/01/cover-NYTimes-3d-500.jpg?139d23


(p. 18) in Silicon Valley, where the locals tend to be too busy starting companies to wallow in gloom, Peter Diamandis has stood out as one of the more striking optimists. Several years ago, Diamandis founded the X Prize Foundation, which rewards entrepreneurs with cash for achieving difficult goals, like putting a reusable spaceship into flight on a limited budget. More recently he helped start Singularity University, an academic program that convenes several weeks a year in the Valley and educates business leaders about the "disruptive" -- i.e., phenomenally innovative -- technological changes Diamandis is anticipating. To be sure, Diamandis is both very bright (he studied molecular biology and aerospace engineering at M.I.T. before getting an M.D. at Harvard) and well informed. Moreover, he's not the kind of optimist who will merely see the glass as half full. He'll give you dozens of reasons, some highly technical, why it's half full. Then he'll explain that your cognitive biases are tricking you into seeing the glass of water in a negative light, and cart out the research of acclaimed psychologists like Daniel Kahne­man to prove his point. Finally he may suggest you stop fretting: new technologies will soon fill the glass up anyway. Indeed, they are likely to overfill it.


. . .


(p. 19) Throughout the book Diamandis . . . offers small groups of driven entrepreneurs as a kind of Leatherman solution to the world's problems. It's true that plenty of insurgents are doing impressive things out there -- Elon Musk's Tesla Motors, which helped jump-start the world's electric car industry, is a good example.


. . .


. . . , there's a significant idea embedded within "Abundance": We should remain aware, as writers like Jared Diamond have likewise told us, that societies can choose their own future, and thus their own fate. In that spirit Diamandis and Kotler put forth a range of possible goals we may achieve if we have the imagination and the will. A little optimism wouldn't hurt, either.



For the full review, see:

JON GERTNER. "Plenty to Go Around." The New York Times Book Review (Sun., April 1, 2012): 18 & 19.

(Note: ellipses added.)

(Note: the online version of the review has the date March 30, 2012.)


The book under review is:

Diamandis, Peter H., and Steven Kotler. Abundance: The Future Is Better Than You Think. New York: Free Press, 2012.






July 2, 2012

Even with Subsidies and High Gas Prices, Electric Cars Cost More



(p. 12) The Ford Focus Electric has a base price of $39,995 -- minus a $7,500 federal tax credit and a $2,500 rebate in California. That puts its tab at $30,000, some $7,000 above the upscale Focus Titanium. I can hear the electric naysayers exclaiming "Aha! You won't make back the savings at the pumps." That's despite $4 gasoline, and the Focus Electric's 110 m.p.g. equivalent rating.

But when buying any new car, especially an innovative model of any kind, emotions, aesthetics and externalities eclipse economics.



For the full story, see:

BRADLEY BERMAN. "BEHIND THE WHEEL; 2012 FORD FOCUS ELECTRIC; The Battery-Driven Car Just Got a Lot More Normal." The New York Times, SportsSunday (Sun., May 6, 2012): 12.

(Note: online version of the story is dated May 4, 2012.)






June 28, 2012

Feds Subsidize First Solar's Losing Technology



(p. B2) First Solar's solar-panel business, which is focused on large solar installations that feed electricity to power companies, is dependent on government subsidies awarded to such developments.


. . .


But some worry that First Solar isn't well positioned for industry trends. The global solar-power market is moving toward rooftop solar-power systems, rather than the large-scale utility power plants where First Solar's products are most effective, said Jesse Pichel, an analyst at Jefferies Group Inc.

"This was a market leader, but its technology is being usurped or surpassed by the Chinese," said Mr. Pichel. "Their product is not competitive in the most economic and sustainable solar market, which is rooftop."



For the full story, see:

CASSANDRA SWEET And RUSSELL GOLD. "First Solar Cuts 2,000 Jobs; Panel Maker Laying Off 30% of Workers, Slashing Production Amid Supply Glut." The Wall Street Journal (Weds., April 18, 2012): B2.

(Note: ellipsis added.)

(Note: online version of the story is dated April 17, 2012.)






June 21, 2012

"A123 Systems" Battery Company Is Another Example of Failed Industrial Policy






The YouTube video embedded above was from a CBS Evening News broadcast in June 2012. It illustrates the difficulty of the government successfully selecting the technologies, and companies, that will eventually prove successful. (The doctrine that government can and should do such selection is often called "industrial policy.")


The Obama administration has bet billions of tax dollars on lithium ion batteries for electric vehicles that A123 Systems won $249 million of. But as Sharyl Attkisson reports, expensive recalls and other setbacks have put substantial doubt in the company's ability to continue.


The text above, and the embedded video clip were published on YouTube on Jun 17, 2012 by CBSNewsOnline at http://www.youtube.com/watch?v=k4Ugklc0rIo






June 20, 2012

Electric Car "Hype is Gone" and Challenges Remain



(p. 7) . . . is this what an emergent technology looks like before it crosses the valley of death?

"Face it, this is not an easy task," said Brett Smith, assistant research director at the Center for Automotive Research in Ann Arbor, Mich. "You still have an energy storage device that's not ready for prime time. You still have the chicken and egg problem with the charging infrastructure. That's not to say it's not viable over the long run. But the hype is gone and the challenges are still there."

The market for all-electric and plug-in electric cars in the United States is tiny, amounting to fewer than 20,000 sales last year out of total light-vehicle sales of 12.8 million. Even in optimistic forecasts, plug-in vehicles will account for less than 5 percent of the global market by 2025.



For the full commentary, see:

JOHN BRODER. "NEWS ANALYSIS; The Electric Car, Unplugged." The New York Times, SundayReview Section (Sun., March 25, 2012): A8.

(Note: ellipsis added.)

(Note: online version of the commentary is dated March 24, 2012.)






June 2, 2012

In Antitrust, as in Medicine, First Do No Harm



(p. 94) Western Union's lawyers carne up with a dusty old New York Stale law, dated 1905, that said no one could buy more than 10 percent of a telegraph company chartered in that state without the approval of Albany lawmakers. Hard to believe, but it was right there in black and white and there was no possibility of getting the New York State legislature to understand why it was vital to build digital highways.

Talk about unintended consequences!

(p. 95) Originally, the law was written to stop Western Union from monopolizing the telegram business, but the law backfired and was used by the monopolist for its own protection.



Source:

Wyly, Sam. 1,000 Dollars and an Idea: Entrepreneur to Billionaire. New York: Newmarket Press, 2008.





May 28, 2012

Proof of Concept: "A Determined Entrepreneur Can Start a Rocket Company from Scratch"



Falcon9RocketLiftoff2012-05-27.jpg 'The Falcon 9 rocket seen in a time-exposure photograph during liftoff." Source of caption and photo: online version of the NYT article quoted and cited below.



(p. A13) CAPE CANAVERAL, Fla. -- He does not have the name recognition of some other space entrepreneurs, people like Richard Branson, the founder of the Virgin empire, or Paul Allen of Microsoft fame, or Jeff Bezos, the Amazon.com billionaire.

That will probably change if things keep going his way. Elon Musk, a computer prodigy and serial entrepreneur whose ambitions include solving the world's energy needs and colonizing the solar system, was the man of the hour -- or of 3:44 a.m. Tuesday, Eastern time -- when the rocket ship built by his company, SpaceX, lifted off gracefully in a nighttime launching and arced off in a streak of light amid loud applause.


. . .


If all goes as planned, his unmanned Dragon capsule, lifted into orbit by his Falcon 9 rocket, will berth at the International Space Station on Friday bearing a modest cargo: 162 meal packets (45 of them low-sodium), a laptop computer, a change of clothes for the station astronauts and 15 student experiments.

Far more important than the supplies is the proof of concept. Mr. Musk is trying to show the world that a determined entrepreneur can start a rocket company from scratch and, a decade later, end up doing a job that has until now been the exclusive province of federal governments.


. . .


Just four years ago, SpaceX went through a near-death experience. The first three launchings of the company's small Falcon 1 rocket failed. One more failure, Mr. Musk said, and he would have run out of money. As he went through a divorce from his first wife, with whom he has five sons, he had to borrow money from friends.

The fourth launching succeeded. Late in 2008, NASA awarded SpaceX the cargo contract. The first two Falcon 9 launchings, in 2010, also succeeded.

Early Tuesday morning, the success streak continued. As the countdown clock hit zero, the engines remained ignited. Less than 10 minutes later, the Dragon was in orbit. It then aced several other early tasks like the deployment of solar arrays and navigational sensors and the testing of GPS equipment.

"Anything could have gone wrong," Mr. Musk said. "And everything went right, fortunately."



For the full story, see:

KENNETH CHANG. "Big Day for Entrepreneur Who Promises More." The New York Times (Weds., May 23, 2012): A13.

(Note: ellipses added.)

(Note: the online version of the story is dated May 22, 2012, and has the title "Big Day for a Space Entrepreneur Promising More.")



MuskElon2012-05-27.jpg











"Elon Musk." Source of caption and photo: online version of the NYT article quoted and cited above.








May 23, 2012

First Principle for Trustbusters Should Be "Do No Harm"



(p. A2) In essence, Justice says that, beginning in 2008, several plankton, in the form of five publishers, conspired against a whale, Amazon, whose monopoly clout had imposed a $9.99 retail price for e-books.

The deal the publishers eventually reached with Apple unfixed the price of e-books by linking their prices to the cover price of the print version. More importantly, publishers could begin to reclaim the right to set e-book retail prices generally.


. . .


Apple, with 15% of the e-book market, is no monopolist. The five publishers, though Justice insists they dominate trade publishing, account for only about half of e-book sales. Crucially for antitrust, the barriers to entry are zilch: Amazon, with 60% market share, could create its own e-book imprint tomorrow and begin bidding for the most popular authors.


. . .


Let's go back to "per se" vs. "rule of reason." Because the 1890 Sherman Act is so sweeping and almost any business arrangement could be read as prohibited, courts understandably evolved a "rule of reason" to distinguish the permissible from the impermissible. Unfortunately, the result has been antitrust as we know it: wild and fluctuating discretion masquerading as law. Retail price maintenance alone has been embraced and dumped so many times by the courts that it must feel like Jennifer Aniston.

"Do no harm" would be a better principle for trustbusters.



For the full commentary, see:

HOLMAN W. JENKINS, JR. "BUSINESS WORLD; Washington vs. Books; What about piracy, low barriers to entry and the fact that literature isn't chopped liver?" The Wall Street Journal (Sat., April 14, 2012): A15.

(Note: the online version of the commentary is dated April 13, 2012.)






May 18, 2012

Asteroid-Mining Start-Up Hopes to Launch First Spacecraft within Two Years



AsteroidMining2012-05-07.jpg

"A computer image shows a rendering of a spacecraft preparing to capture a water-rich, near-Earth asteroid." Source of caption: print version of the WSJ article quoted and cited below. Source of photo: online version of the WSJ article quoted and cited below.


(p. B3) SEATTLE--A start-up with high-profile backers on Tuesday unveiled its plan to send robotic spacecraft to remotely mine asteroids, a highly ambitious effort aimed at opening up a new frontier in space exploration.

At an event at the Seattle Museum of Flight, a group that included former National Aeronautics and Space Administration officials unveiled Planetary Resources Inc. and said it is developing a "low-cost" series of spacecraft to prospect and mine "near-Earth" asteroids for water and metals, and thus bring "the natural resources of space within humanity's economic sphere of influence."

The solar system is "full of resources, and we can bring that back to humanity," said Planetary Resources co-founder Peter Diamandis, who helped start the X-Prize competition to spur nongovernmental space flight.

The company said it expects to launch its first spacecraft to low-Earth orbit--between 100 and 1,000 miles above the Earth's surface--within two years, in what would be a prelude to sending spacecraft to prospect and mine asteroids.

The company, which was founded three years ago but remained secret until last week, said it could take a decade to finish prospecting, or identifying the best candidates for mining.



For the full story, see:

AMIR EFRATI. "Asteroid-Mining Strategy Is Outlined by a Start-Up." The Wall Street Journal (Weds., April 25, 2012): B3.

(Note: the online version of the story is dated April 24, 2012, and has the title "Start-Up Outlines Asteroid-Mining Strategy.")







May 9, 2012

Capitalism More about Creating New Markets than about Competing to Dominate Old Ones



(p. A21) As a young man, Peter Thiel competed to get into Stanford. Then he competed to get into Stanford Law School. Then he competed to become a clerk for a federal judge. Thiel won all those competitions. But then he competed to get a Supreme Court clerkship.

Thiel lost that one. So instead of being a clerk, he went out and founded PayPal. Then he became an early investor in Facebook and many other celebrated technology firms. Somebody later asked him. "So, aren't you glad you didn't get that Supreme Court clerkship?"

The question got Thiel thinking. His thoughts are now incorporated into a course he is teaching in the Stanford Computer Science Department. (A student named Blake Masters posted outstanding notes online, and Thiel has confirmed their accuracy.)

One of his core points is that we tend to confuse capitalism with competition. We tend to think that whoever competes best comes out ahead. In the race to be more competitive, we sometimes confuse what is hard with what is valuable. The intensity of competition becomes a proxy for value.

In fact, Thiel argues, we often shouldn't seek to be really good competitors. We should seek to be really good monopolists. Instead of being slightly better than everybody else in a crowded and established field, it's often more valuable to create a new market and totally dominate it. The profit margins are much bigger, and the value to society is often bigger, too.

Now to be clear: When Thiel is talking about a "monopoly," he isn't talking about the illegal eliminate-your-rivals kind. He's talking about doing something so creative that you establish a distinct market, niche and identity. You've established a creative monopoly and everybody has to come to you if they want that service, at least for a time.



For the full commentary, see:

DAVID BROOKS. "The Creative Monopoly." The Wall Street Journal (Tues., April 24, 2012): A21.

(Note: the online version of the article is dated April 23, 2012.)


The online Peter Thiel notes are at:

http://blakemasters.tumblr.com/post/21169325300/peter-thiels-cs183-startup-class-4-notes-essay





May 6, 2012

Entrepreneurs Will Mine Asteroids to "Help Ensure Humanity's Prosperity"



CameronJames2012-04-30.jpg "Space mining has captivated Hollywood. Director James Cameron is a backer of the new venture." Source of caption and photo: online version of the WSJ article quoted and cited below.


(p. B1) A new company backed by two Google Inc. billionaires, film director James Cameron and other space exploration proponents is aiming high in the hunt for natural resources--with mining asteroids the possible target.

The venture, called Planetary Resources Inc., revealed little in a press release this week except to say that it would "overlay two critical sectors--space exploration and natural resources--to add trillions of dollars to the global GDP" and "help ensure humanity's prosperity." The company is formally unveiling its plans at an event . . . in Seattle.


. . .


[The] . . . event is being hosted by Peter H. Diamandis and Eric Anderson, known for their efforts to develop commercial space exploration, and two former NASA officials.

Mr. Diamandis, a driving force behind the Ansari X-Prize competition to spur non-governmental space flight, has long discussed his goal to become an asteroid miner. He contends that such work by space pioneers would lead to a "land rush" by companies to develop lower-cost technology to travel to and extract resources from asteroids.



For the full story, see:

AMIR EFRATI. "A Quixotic Quest to Mine Asteroids." The Wall Street Journal (Sat., April 21, 2012,): B1 & B4.

(Note: ellipses and bracketed word added.)

(Note: the online "updated" version of the article is dated April 23, 2012.)






May 4, 2012

Innovation Took "Three Years Working through the Bureaucratic Snags"



FlyingCar2012-04-30.jpg "FULL FLEDGED; The production prototype of the Terrafugia Transition, with its wings folded and road-ready." Source of caption and photo: online version of the NYT article quoted and cited below.


(p. 13) THE promise of an airplane parked in every driveway, for decades a fantasy of suburban commuters and a staple of men's magazines, resurfaced this month in Manhattan. On display at the New York auto show was the Terrafugia Transition, an airplane with folding wings and a drive system that enabled it to be used on the road.


. . .


But there can be many delays along the road from concept to certification. For instance, government officials and the designers have had to determine which regulations -- aircraft or automotive -- take precedence when the vehicle in question is both.


. . .


In 2010, the $94,000 Maverick, a rudimentary buggy that takes to the air under a powered parachute, earned certification as a light-sport aircraft. Troy Townsend, design manager and chief test pilot for the company, based in Dunnellon, Fla., said he spent spent nearly all of his time over the course of three years working through the bureaucratic snags.

"There was a lot of red tape," Mr. Townsend said. "The certification process went all the way to Oklahoma and Washington, D.C."



For the full story, see:

CHRISTINE NEGRONI. "Before Flying Car Can Take Off, There's a Checklist." The New York Times, SportsSunday Section (Sun., April 29, 2012): 13.

(Note: ellipses added.)

(Note: the online version of the story is dated April 27, 2012.)



FederalRegsFlyingTable.pngSource of table: online version of the NYT article quoted and cited above.






April 29, 2012

"In a Garage Pursuing a Dream"



(p. 257) The increase in computer-animated films . . . marked the dawning of a democratic moment in artistic expression and entrepreneurship. Just as technological developments in digital production were (p. 258) opening the door more widely in live-action filmmaking, technology was making computer animation more accessible every year.

Computer animation was still an art form that required talent and intense Commitment; it wasn't within reach of Everyman. The accessibility of its tools, however, brought new possibilities. Where Pixar's early years had required a succession of wealthy patrons--Alexander Schure, George Lucas, and Steve Jobs--an enterprising artist of the early twenty-first century was not so dependent. The hardware and software of an animator's workstation, once the province of major studios and effects houses, could now be had for the cost of a good used car. As Pixar started its new life as a crown jewel of the Walt Disney Co., it was plausible that it would sooner or later have to jockey release dates with a new kind of rival. Or, rather, it would have to face a rival that looked much the way Pixar itself did thirty years earlier, as a group of men and women in a garage pursuing a dream.



Source:

Price, David A. The Pixar Touch: The Making of a Company. New York: Alfred A. Knopf, 2008.

(Note: ellipsis added.)

(Note: my strong impression is that the pagination is the same for the 2008 hardback and the 2009 paperback editions, except for part of the epilogue, which is revised and expanded in the paperback. I believe the passage above has the same page number in both editions.)





April 25, 2012

Intellectual Property Rights as Refined in Case Law



The questions and answers in court illustrate how case law would approach the issue of refining and reforming intellectual property issues based on concepts of justice, but also on practical issues. (This is from Disney and Pixar lawyer Steve Marenberg questioning Dick Cook in testimony before Judge Clarence Brimmer, Jr. on November 1, 2001, the day before Monsters, Inc. was scheduled to be released.)



(p. 193) Q : So obviously the delay of the film by injunction or otherwise would affect the first weekend and the ability to gain all of the benefits you've gotten by virtue of the tact that November second is the first weekend?

A : It would be a disaster.

Q : And that would affect, then, not only the theatrical performance of the film, but what other markets in the United Sates?

A : Well, it would completely be a snowball effect in a reverse way in that it would certainly put a damper on all of the home video activities, all the DVD activities; in fact, would influence international because international is greatly influenced on how well it does in the United States, and by taking that away, it would definitely, definitely, have a big, big impact on the success of the film.

And furthermore, going further, is that it would take away any of the other ancillary things that happen, you (p. 194) know, whether it would become a television series, whether or not it becomes a piece of an attraction at the parks, whether it becomes a land at the parks, or any of those kinds of things.



Source:

Price, David A. The Pixar Touch: The Making of a Company. New York: Alfred A. Knopf, 2008.

(Note: my strong impression is that the pagination is the same for the 2008 hardback and the 2009 paperback editions, except for part of the epilogue, which is revised and expanded in the paperback. I believe the passage above has the same page number in both editions.)

(Note: on p. 190 of the book, Price misspells Marenberg's name as "Marenburg.")





April 19, 2012

"Dematerialization" Means More Goods from Fewer Resources



(p. C4) Economic growth is a form of deflation. If the cost of, say, computing power goes down, then the users of computing power acquire more of it for less--and thus attain a higher standard of living. One thing that makes such deflation possible is dematerialization, the reduction in the quantity of stuff needed to produce a product. An iPhone, for example, weighs 1/100th and costs 1/10th as much as an Osborne Executive computer did in 1982, but it has 150 times the processing speed and 100,000 times the memory.

Dematerialization is occurring with all sorts of products. Banking has shrunk to a handful of electrons moving on a cellphone, as have maps, encyclopedias, cameras, books, card games, music, records and letters--none of which now need to occupy physical space of their own. And it's happening to food, too. In recent decades, wheat straw has shrunk as grain production has grown, because breeders have persuaded the plant to devote more of its energy to making the thing that we value most. Future dematerialization includes the possibility of synthetic meat--produced in a lab without brains, legs or guts.

Dematerialization is one of the reasons that Peter Diamandis and Steven Kotler give for the future's being "better than you think" in their new book, "Abundance."



For the full commentary, see:

MATT RIDLEY. "MIND & MATTER; The Future Is So Bright, it's Dematerializing." The Wall Street Journal (Sat., February 25, 2012): C4.


The book mentioned by Ridley is:

Diamandis, Peter H., and Steven Kotler. Abundance: The Future Is Better Than You Think. New York: Free Press, 2012.






April 12, 2012

Benefits of Driverless Cars Justify Changing Liability Laws



DriverlessCar2012-03-26.jpg "The car is driven by a computer that steers, starts and stops itself. A 360 degrees laser scanner on top of the car, a GPS system and other sensors monitor the surrounding traffic." Source of caption and photo: online version of the WSJ article quoted and cited below.


(p A13) Expect innovations that change the nature of driving more than anything since the end of the hand-crank engine--so long as the legal and regulatory systems don't strangle new digital technologies before they can roll off the assembly line.


. . .


Mr. Ford outlined a future of what the auto industry calls "semiautonomous driving technology," meaning increasingly self-driving cars. Over the next few years, cars will automatically be able to maintain safe distances, using networks of sensors, V-to-V (vehicle-to-vehicle) communications and real-time tracking of driving conditions fed into each car's navigation system.

This will limit the human error that accounts for 90% of accidents. Radar-based cruise control will stop cars from hitting each other, with cars by 2025 driving themselves in tight formations Mr. Ford describes as "platoons," cutting congestion as the space between cars is reduced safely.


. . .


Over the next decade, cars could finally become true automobiles. Our laws will have to be updated for a new relationship between people and cars, but the benefits will be significant: fewer traffic accidents and fewer gridlocked roads--and, perhaps best of all, young people will be in self-driving cars, not teenager-driven cars.



For the full commentary, see:

L. GORDON CROVITZ. "INFORMATION AGE; The Car of the Future Will Drive You; A truly auto-mobile is coming if liability laws don't stop it." The Wall Street Journal (Mon., March 5, 2012): A13.

(Note: ellipses added.)





March 31, 2012

Quantum Computers May Revolutionize Nanotechnology and Drug Design



AaronsonScottMIT201-03-11.jpg










"Scott Aaronson." Source of caption and photo: online version of the NYT commentary quoted and cited below.




(p. D5) When people hear that I work on quantum computing -- one of the most radical proposals for the future of computation -- their first question is usually, "So when can I expect a working quantum computer on my desk?" Often they bring up breathless news reports about commercial quantum computers right around the corner. After I explain the strained relationship between those reports and reality, they ask: "Then when? In 10 years? Twenty?"

Unfortunately, this is sort of like asking Charles Babbage, who drew up the first blueprints for a general-purpose computer in the 1830s, whether his contraption would be hitting store shelves by the 1840s or the 1850s. Could Babbage have foreseen the specific technologies -- the vacuum tube and transistor -- that would make his vision a reality more than a century later? Today's quantum computing researchers are in a similar bind. They have a compelling blueprint for a new type of computer, one that could, in seconds, solve certain problems that would probably take eons for today's fastest supercomputers. But some of the required construction materials don't yet exist.


. . .


While code-breaking understandably grabs the headlines, it's the more humdrum application of quantum computers -- simulating quantum physics and chemistry -- that has the potential to revolutionize fields from nanotechnology to drug design.


. . .


Like fusion power, practical quantum computers are a tantalizing possibility that the 21st century may or may not bring -- depending on the jagged course not only of science and technology, but of politics and economics.



For the full commentary, see:

SCOTT AARONSON. "ESSAY; Quantum Computing Promises New Insights, Not Just Supermachines." The New York Times (Tues., December 6, 2011): D5.

(Note: ellipses added.)

(Note: the online version of the commentary is dated December 5, 2011.)





March 17, 2012

Internet Companies Respect the Value of Your Time



JainArvindGoogleEngineer2012-03-08.jpg "Arvind Jain, a Google engineer, pointed out the loading speed of individual elements of a website on a test application used to check efficiency, at Google offices in Mountain View, Calif." Source of caption and photo: online version of the NYT article quoted and cited below.



(p. A1) Wait a second.

No, that's too long.

Remember when you were willing to wait a few seconds for a computer to respond to a click on a Web site or a tap on a keyboard? These days, even 400 milliseconds -- literally the blink of an eye -- is too long, as Google engineers have discovered. That barely perceptible delay causes people to search less.

"Subconsciously, you don't like to wait," said Arvind Jain, a Google engineer who is the company's resident speed maestro. "Every millisecond matters."

Google and other tech companies are on a new quest for speed, challenging the likes of Mr. Jain to make fast go faster. The reason is that data-hungry smartphones and tablets are creating frustrating digital traffic jams, as people download maps, video clips of sports highlights, news updates or recommendations for nearby restaurants. The competition to be the quickest is fierce.

People will visit a Web site less often if it is slower than a close competitor by more than 250 milliseconds (a millisecond is a thousandth of a second).

"Two hundred fifty milliseconds, either slower or faster, is close to the magic number now for competitive advantage on the Web," said Harry Shum, a computer scientist and speed specialist at Microsoft.


. . .


(p. A3) The need for speed itself seems to be accelerating. In the early 1960s, the two professors at Dartmouth College who invented the BASIC programming language, John Kemeny and Thomas Kurtz, set up a network in which many students could tap into a single, large computer from keyboard terminals.

"We found," they observed, "that any response time that averages more than 10 seconds destroys the illusion of having one's own computer."

In 2009, a study by Forrester Research found that online shoppers expected pages to load in two seconds or fewer -- and at three seconds, a large share abandon the site. Only three years earlier a similar Forrester study found the average expectations for page load times were four seconds or fewer.

The two-second rule is still often cited as a standard for Web commerce sites. Yet experts in human-computer interaction say that rule is outdated. "The old two-second guideline has long been surpassed on the racetrack of Web expectations," said Eric Horvitz, a scientist at Microsoft's research labs.



For the full story, see:

STEVE LOHR. "For Impatient Web Users, an Eye Blink Is Just Too Long to Wait." The New York Times (Thurs., March 1, 2012): A1 & A3.

(Note: ellipsis added.)

(Note: the online version of the article is dated February 29, 2012.)



WebSpeedGraphic2012-03-08.jpgSource of graph: online version of the NYT article quoted and cited above.






March 1, 2012

The Impact of Cheap Smart Phones on Africa





WalesJim2012-02-26.jpg








Jimbo Wales

Source of photo: online version of the NYT article quoted and cited below.


















(p. 2) PHONING: A friend of mine bought me an Ideos phone on the street in Kenya for about $80. This is an Android phone that's a bit smaller than an iPhone, but a lot cheaper. This is really exciting because at that price point, hundreds of thousands and soon millions of smartphones are going to be sold across Africa. The impact for people's access to knowledge in some very difficult places is enormous.


For the full interview, see:

Jimmy Wales as interviewed by KATE MURPHY. "DOWNLOAD; Jimmy Wales." The New York Times, SundayReview (Sun., February 12, 2012): 2.

(Note: the online version of the interview is dated February 11, 2012.)






February 18, 2012

Paul Allen Uses Microsoft Profits for Bold Private Space Project



StratolaunchSpacePlane2012-02-05.jpgSource of graphic: online version of the WSJ article quoted and cited below.



(p. B1) Microsoft Corp. co-founder Paul Allen indicated he is prepared to commit $200 million or more of his wealth to build the world's largest airplane as a mobile platform for launching satellites at low cost, which he believes could transform the space industry.

Announced Tuesday, the novel, high-risk project conceived by renowned aerospace designer Burt Rutan seeks to combine engines, landing gears and other parts removed from old Boeing 747 jets with a newly created composite craft from Mr. Rutan and a powerful rocket to be built by a company run by Internet billionaire and commercial-space pioneer Elon Musk.

Dubbed Stratolaunch and funded by one of Mr. Allen's closely held entities, the venture seeks to meld decades-old airplane technology with cutting-edge booster-rocket designs in an unprecedented way to assemble a hybrid that would offer the first totally privately funded space transportation system.



For the full story, see:

ANDY PASZTOR And DIONNE SEARCEY. "Paul Allen, Supersizing Space Flight; Billionaire's Novel Vision Has Wingspan Wider Than a Football Field, Weighs 1.2 Million Pounds." The Wall Street Journal (Weds., December 5, 2011): B1 & B5.







February 17, 2012

"What Success Had Brought Him, . . . , Was Freedom"



(p. 5) The success of Pixar's films had brought him something exceedingly rare in Hollywood: not the house with the obligatory pool in the backyard and the Oscar statuettes on the fireplace mantel, or the country estate, or the vintage Jaguar roadster--although he had all of those things, too. It wasn't that he could afford to indulge his affinity for model railroads by acquiring a full-size 1901 steam locomotive, with plans to run it on the future site of his twenty-thousand-square-foot mansion in Sonoma Valley wine country. (Even Walt Dìsney's backyard train had been a mere one-eighth-scale replica.)

None of these was the truly important fruit of Lasseter's achievements. What success had brought him, most meaningfully, was freedom. Having created a new genre of film with his colleagues at Pixar, he had been able to make the films he wanted to make, and he was coming back to Disney on his own terms.



Source:

Price, David A. The Pixar Touch: The Making of a Company. New York: Alfred A. Knopf, 2008.

(Note: ellipsis in title was added.)

(Note: my strong impression is that the pagination is the same for the 2008 hardback and the 2009 paperback editions, except for part of the epilogue, which is revised and expanded in the paperback. I believe the passage above has the same page number in both editions.)





February 12, 2012

Pixar as a Case Study on Innovative Entrepreneurship



Pixar-TouchBK2012-02-05.jpg














Source of book image: http://murraylibrary.org/2011/09/the-pixar-touch-the-making-of-a-company/





Toy Story and Finding Nemo are among my all-time-favorite animated movies. How Pixar developed the technology and the story-telling sense, to make these movies is an enjoyable and edifying read.

Along the way, I learned something about entrepreneurship, creative destruction, and the economics of technology. In the next couple of months I occasionally will quote passages that are memorable examples of broader points or that raise thought-provoking questions about how innovation happens.


Book discussed:

Price, David A. The Pixar Touch: The Making of a Company. New York: Alfred A. Knopf, 2008.






February 7, 2012

The Tasmanian Technological Regress: "Slow Strangulation of the Mind"



(p. 78) The most striking case of technological regress is Tasmania. Isolated on an island at the end of the world, a population of less than 5,000 hunter-gatherers divided into nine tribes did not just stagnate, or fail to progress. They fell steadily and gradually back into a simpler toolkit and lifestyle, purely because they lacked the numbers to sustain their existing technology. Human beings reached Tasmania at least 35,000 years ago while it was still connected to Australia. It remained connected - on and off - until about 10,000 years ago, when the rising seas filled the Bass Strait. Thereafter the Tasmanians were isolated. By the time Europeans first encountered Tasmanian natives, they found them not only to lack many of the skills and tools of their mainland cousins, but to lack many technologies that their own ancestors had once possessed. They had no bone tools of any kind, such as needles and awls, no cold-weather clothing, no fish hooks, no hafted tools, no barbed spears, no fish traps, no spear throwers, no boomerangs. A few of these had been invented on the mainland after the Tasmanians had been isolated from it - the boomerang, for instance - but most had been made and used by the very first Tasmanians. Steadily and inexorably, so the archaeological history tells, these tools and tricks were abandoned. Bone tools, for example, grew simpler and simpler until they were dropped altogether about 3,800 years ago. Without bone tools it became impossible to sew skins into clothes, so even in the bitter winter, the Tasmanians went nearly naked but for seal-fat grease smeared on their skin and wallaby pelts over their shoulders. The first Tasmanians caught and ate plenty of fish, but by the time of Western contact they not only ate no fish (p. 79) and had eaten none for 3,000 years, but they were disgusted to be offered it (though they happily ate shellfish).

The story is not quite that simple, because the Tasmanians did invent a few new things during their isolation. Around 4,000 years ago they came up with a horribly unreliable form of canoe-raft, made of bundles of rushes and either paddled by men or pushed by swimming women (!), which enabled them to reach offshore islets to harvest birds and seals. The raft would become waterlogged and disintegrate or sink after a few hours, so it was no good for re-establishing contact with the mainland. As far as innovation goes, it was so unsatisfactory that it almost counts as an exception to prove the rule. The women also learnt to dive up to twelve feet below the water to prise clams off the rocks with wooden wedges and to grab lobsters. This was dangerous and exhausting work, which they were very skilled at: the men did not take part. So it was not that there was no innovation; it was that regress overwhelmed progress.

The archaeologist who first described the Tasmanian regress, Rhys Jones, called it a case of the 'slow strangulation of the mind', which perhaps understandably enraged some of his academic colleagues. There was nothing wrong with individual Tasmanian brains; there was something wrong with their collective brains. Isolation - self-sufficiency - caused the shrivelling of their technology. Earlier I wrote that division of labour was made possible by technology. But it is more interesting than that. Technology was made possible by division of labour: market exchange calls forth innovation.



Source:

Ridley, Matt. The Rational Optimist: How Prosperity Evolves. New York: Harper, 2010.





January 30, 2012

Creative Destruction Creates as Many New Jobs as It Destroys



(p. 113) It was Joseph Schumpeter who pointed out that the competition which keeps a businessman awake at night is not that from his rivals cutting prices, but that of entrepreneurs making (p. 114) his product obsolete. As Kodak and Fuji slugged it out for dominance in the 35mm film industry in the 1990s, digital photography began to extinguish the entire market for analogue film - as analogue records and analogue video cassettes had gone before. Creative destruction, Schumpeter called it. His point was that there is just as much creation going on as destruction - that the growth of digital photography would create as many jobs in the long run as were lost in analogue, or that the savings pocketed by a Wal-Mart customer are soon spent on other things, leading to the opening of new stores to service those new demands. In America, roughly 15 per cent of jobs are destroyed every year; and roughly 15 per cent created.


Source:

Ridley, Matt. The Rational Optimist: How Prosperity Evolves. New York: Harper, 2010.





January 17, 2012

Krim Saw Use for Noisy CK722 Transistors



KrimNorman2012-01-13.jpg








Norman Krim holding some early transistors. He first put transistors into hearing aids. Source of caption and photo: online version of the NYT obituary quoted and cited below.




(p. B11) Mr. Krim, who made several breakthroughs in a long career with the Raytheon Company and who had an early hand in the growth of the RadioShack chain, did not invent the transistor. (Three scientists did, in 1947, at Bell Laboratories.)

But he saw the device's potential and persuaded his company to begin manufacturing it on a mass scale, particularly for use in miniaturized hearing aids that he had designed. Like the old tube, a transistor amplifies audio signals.

As Time magazine wrote in 1953: "This little device, a single speck of germanium, is smaller than a paper clip and works perfectly at one-tenth the power needed by the smallest vacuum tube. Today, much of Raytheon's transistor output goes to America's hearing aid industry." (Germanium, a relatively rare metal, was the predecessor to silicon in transistors.)


. . .


Thousands of hearing-disabled people benefited from Mr. Krim's initial use of the transistor in compact hearing aids. But not every transistor Raytheon made was suitable for them, he found.

"When transistors were first being manufactured by Raytheon on a commercial scale, there was a batch called CK722s that were too noisy for use in hearing aids," said Harry Goldstein, an editor at IEEE Spectrum, the magazine of the Institute of Electrical and Electronics Engineers.

So Mr. Krim contacted editors at magazines like Popular Science and Radio Electronics and began marketing the CK722s to hobbyists.

"The result was that a whole generation of aspiring engineers -- kids, really, working in their garages and basements -- got to make all kinds of electronic projects," Mr. Goldstein said, among them transistor radios, guitar amplifiers, code oscillators, Geiger counters and metal detectors. "A lot of them went on to become engineers."

Mr. Ward called Mr. Krim "the father of the CK722."



For the full obituary, see:

DENNIS HEVESI. "Norman Krim, 98, Dies; Championed the Transistor." The New York Times (Weds, December 21, 2011): B11.

(Note: ellipsis added.)

(Note: the online version of the article is dated December 20, 2011 and has the title "Norman Krim, Who Championed the Transistor, Dies at 98.")





January 1, 2012

Ridley Argues that Our Future Can Be Bright




RationalOptimistBK.jpg

















Source of book image: http://1.bp.blogspot.com/_cheRMv1X2oI/TAOvTFTnoeI/AAAAAAAAAgU/WAp7q0I_5mw/s1600/Ridley+Rational+Optimist.jpg




Ridley's book is very well-written, well-argued and well-documented. He takes on all the main arguments against a happy future for humans. I agree with most of what he writes. (One exception is that I think he underestimates the importance of patents in enabling a broader group of inventors to continue inventing.)

In the coming weeks, I will be quoting some of the more memorable, thought-provoking, or useful passages.



Book discussed:

Ridley, Matt. The Rational Optimist: How Prosperity Evolves. New York: Harper, 2010.






December 31, 2011

Federal Subsidies Create Few Green Jobs



(p. F2) . . . solar power, which makes extensive use of robots in fabricating the cells, and has no moving parts to service once it is up and running, may be an odd choice for job creation.

"It's just not that labor-intensive," said Howard Axelrod, an engineer and economist. And as for the jobs it creates, there may be a price elsewhere, Dr. Axelrod said.


. . .


Build enough solar plants and some coal plants will shut down; that would amount to firing Peter to hire Paul.


. . .


And, economists point out, some of the work that renewable energy creates goes to people who already have jobs -- roofers who install the panels or truck drivers who move them around, or steel workers who make towers for new wind machines.

Some of the jobs could eventually go elsewhere. Two years ago, Evergreen Solar, which got $58 million in aid from Massachusetts for a factory in Devens, said it would shift production to China instead.


. . .


The debate is part of a larger discussion of what constitutes a "green" job. In October 2009, Congress gave the Bureau of Labor Statistics a special appropriation to count them.


. . .


"Driving a bus is driving a bus, right?" said Connie Mack, Republican of Florida. Hilda Solis, the secretary of labor, said they were "green buses." But aides later clarified that the bureau counted any bus driving job as green because it preserved natural resources.

None of this suggests that green is bad, just that it is not particularly job-heavy. In December 2010, Susan Combs, the comptroller of Texas, reported that school districts in her state were giving tax abatements to lure new jobs, but had to give $1.6 million for every wind energy job. Manufacturing jobs could be created for $166,000 each.



For the full story, see:

MATTHEW L. WALD. "Solar Power Industry Falls Short of Hopes in Job Creation." The New York Times (Weds., October 26, 2011): F2.

(Note: ellipses added.)

(Note: the online version of the article has the date October 25, 2011.)





December 30, 2011

More Firms Adopt 'Bring Your Own Device' (BYOD) Policies to Empower Workers and Cut Costs



CitrixSystemsWorkersPickOwnLaptops2011-11-10.jpg"At Citrix Systems, Berkley Reynolds, left, uses his Alienware laptop, and Alan Meridian, his MacBook Pro, paid for with stipends." Source of caption and photo: online version of the NYT article quoted and cited below.


(p. B1) SAN FRANCISCO -- Throughout the information age, the corporate I.T. department has stood at the chokepoint of office technology with a firm hand on what equipment and software employees use in the workplace.

They are now in retreat. Employees are bringing in the technology they use at home and demanding the I.T. department accommodate them. The I.T. department often complies.

Some companies have even surrendered to what is being called the consumerization of I.T. At Kraft Foods, the I.T. department's involvement in choosing technology for employees is limited to handing out a stipend. Employees use the money to buy whatever laptop they want from Best Buy, Amazon.com or the local Apple store.

"We heard from people saying, 'How come I have better equipment at home?' " said Mike Cunningham, chief technology officer for Kraft Foods. "We said, hey, we can address that."

Encouraging employees to buy their own laptops, or bring their mobile phones and iPads from home, is gaining traction in the workplace. A survey published on Thursday by Forrester Research found that 48 percent of information workers buy smartphones for work without considering what their I.T. department supports. By being more flexible, companies are hoping that workers will be more comfortable with their devices and therefore more productive.

"Bring your own device" policies, as they are called, are also shifting the balance of power among electronics makers. Manufacturers good at selling to consumers are increasingly gaining the upper hand, while those focused on bulk corporate sales are slipping.


. . .


(p. B6) Letting workers bring their iPhones and iPads to work can . . . save companies money. In some cases, employees pay for equipment themselves and seek tech help from store staff rather than their company's I.T. department. "You can basically outsource your I.T. department to Apple," said Ben Reitzes, an analyst with Barclays Capital.

A similar B.Y.O.D. program at Citrix Systems, a software maker that also helps its clients implement such programs, saves the company about 20 percent on each laptop over three years. Of the 1,000 or so employees in Citrix's program, 46 percent have bought Mac computers, according to Paul Martine, Citrix's chief information officer. "That was a little bit of a surprise."



For the full story, see:

VERNE G. KOPYTOFF. "More Offices Let Workers Choose Their Own Devices." The New York Times (Fri., September 23, 2011): B1 & B6.

(Note: ellipses added.)

(Note: the online version of the article is dated September 22, 2011.)






December 24, 2011

Innovation Not Highly Correlated with R&D Spending



InnovationAndRandDGraph2011-11-11.jpg











Source of graph: online version of the WSJ article quoted and cited below.



(p. B9) Many companies say innovation is a top priority, but even those who spend the most on research and development can have little to show for it, a new study says.

A report expected to be released Monday by consulting firm Booz & Co., says that few of the biggest R&D spenders crack the top 10 in terms of being considered "innovative" by their peers.

Booz identified 1,000 companies with the biggest 2010 research-and-development budgets and invited 600 executives from those companies to rate which ones they deemed most innovative. The most frequent pick was Apple Inc.--the 70th biggest research-and-development spender--followed by Google Inc. and 3M Co., also not among the top-20 spenders.



For the full story, see:

MELISSA KORN. "Top 'Innovators' Rank Low in R&D Spending." The Wall Street Journal (Mon., OCTOBER 24, 2011): B9.





December 14, 2011

Entrepreneur Julius Blank's Greatest Pleasure Came from "Building Something from Nothing"



FairchildSemiconductorFoundersIn1988.jpg"Fairchild Semiconductor's founders in 1988. Victor Grinich (left), Jay Last, Jean Hoerni, Julius Blank, Eugene Kleiner, Sheldon Roberts, Robert N. Noyce (seated, left,) and Gordon E. Moore." Source of caption and photo: online version of the NYT obituary quoted and cited below.


(p. B14) Julius Blank, a mechanical engineer who helped start a computer chip company in the 1950s that became a prototype for high-tech start-ups and a training ground for a generation of Silicon Valley entrepreneurs, died on Saturday in Palo Alto, Calif.. He was 86.


. . .


Mr. Blank and his partners -- who included Robert N. Noyce and Gordon E. Moore, the future founders of the Intel Corporation -- began their venture as scientist-entrepreneurs in the wake of a mutiny of sorts against their common previous employer, the Nobel Prize-winning physicist William B. Shockley.

Dr. Shockley, . . . , had recruited the eight scientists from around the country in 1956 to work in his own semiconductor lab in nearby Mountain View, Calif.

The group left en masse the next year because of what its members described as Dr. Shockley's authoritarian management style and their differences with him over his scientific approach. Dr. Shockley called it a betrayal.

Fairchild's founders came to be branded in the lore of Silicon Valley as the "Traitorous Eight." How that happened remains something of a mystery.


. . .


When he left Fairchild in 1969 -- he was the last of the eight founding partners to depart -- Mr. Blank became an investor and consultant to start-up companies and helped found the technology firm Xicor, which was sold in 2004 for $529 million to Intersil.

His former partners, in addition to founding Intel, had started Advanced Micro Devices and National Semiconductor. Mr. Kleiner had founded a venture capital firm that became an early investor in hundreds of technology companies, including Amazon.com, Google and AOL. Still, the greatest pleasure of his working life, Mr. Blank said in a 2008 interview for the archives of the Computer History Museum, a project in Silicon Valley, came with the uncertainty and camaraderie of "the early years, building something from nothing."

Mr. Blank described a moment in the first days of Fairchild, just before production began in its factory built from nothing, when the ducts and plumbing and air-conditioning were set, and the new crystal growers and one-of-a-kind chip making machines were ready to be installed.

"I remember the day we finally got the floor tile laid," he said. "And that night, Noyce and the rest of the guys came out and got barefoot and rolled their pants up and were swabbing the floors. I wish I had a picture of that."



For the full obituary, see:

PAUL VITELLO. "Julius Blank, 86, Dies; Built First Chip Maker." The New York Times (Fri., September 23, 2011): B14.

(Note: ellipses added.)

(Note: the online version of the obituary is dated September 22, 2011 and had the title "Julius Blank, Who Built First Chip Maker, Dies at 86.")



BlankJuliusInMay2011.jpg












May 2011 photo of Julius Blank. Source of photo: online version of the NYT obituary quoted and cited above.






November 15, 2011

Patent on Cotton Gin Not Enough for Whitney to Get Rich




(p. 395) Whitney patented his 'gin' (a shortened form of 'engine') and prepared to become stupendously wealthy.


. . .


(p. 396) . . . , the gin truly was a marvel. Whitney and Miller formed a partnership with every expectation of getting rich, but they were disastrous businessmen. For the use of their machine, they demanded a one-third share of any harvest - a proportion that plantation owners and southern legislators alike saw as frankly rapacious. That Whitney and Miller were both Yankees didn't help sentiment either. Stubbornly they refused to modify their demands, convinced that southern growers could not hold out in the face of such a transforming piece of technology. They were right about the irresistibility, but failed to note that the gin was also easily pirated. Any halfway decent carpenter could knock one out in a couple of hours. Soon plantation owners across the south were harvesting cotton with home-made gins. Whitney and Miller filed sixty suits in Georgia and many others elsewhere, but found little sympathy in southern courts. By 1800 - just seven years after the gin's invention - Miller and Catharine Greene were in such desperate straits that they had to sell the plantation.




Source:

Bryson, Bill. At Home: A Short History of Private Life. New York: Doubleday, 2010.

(Note: ellipses added.)





November 5, 2011

Art Diamond Defended Air Conditioning in WPR Debate with Stan Cox




From archive of the Joy Cardin show:


Wednesday 6/8/2011 7:00 AM

Joy Cardin - 110608B After seven, Joy Cardin asks her guests a weather-related Big Question: "Do we rely too much on air-conditioning?"

Guests:
- Stan Cox, Senior Scientist, The Land Institute. Author, "Losing Our Cool: Uncomfortable Truths About Our Air Conditioned World" Author's blog: http://losingourcool.wordpress.com
- Arthur Diamond, Professor of Economics, University of Nebraska at Omaha. Author, conference paper, "Keeping Our Cool: In Defense of Air Conditioning" (http://artdiamond.com/)




Link to streaming version of debate between Art Diamond and Stan Cox (author Losing Our Cool) on whether air conditioning is good (Diamond) or bad (Cox). Broadcast on Joy Cardin Show on the Wisconsin Public Radio network on Weds., June 8, 2011, from about 7:00 - 7:50 AM: http://wpr.org/webcasting/play-wma.cfm?FileName=jca110608b.wma&pagename=/webcasting/audioarchives_display.cfm






October 23, 2011

Obama Regulations Are "Choking Off Innovation"



From 2007 to 2010 Nina V. Fedoroff was the science and technology adviser to Secretary of State Hilary Clinton in the Obama administration. Fedoroff is currently a Professor of Biology at Penn State. The passages quoted below are from her courageous commentary in The New York Times op-ed section:



(p. A21) . . . even as the Obama administration says it wants to stimulate innovation by eliminating unnecessary regulations, the Environmental Protection Agency wants to require even more data on genetically modified crops, which have been improved using technology with great promise and a track record of safety. The process for approving these crops has become so costly and burdensome that it is choking off innovation.

Civilization depends on our expanding ability to produce food efficiently, which has markedly accelerated thanks to science and technology. The use of chemicals for fertilization and for pest and disease control, the induction of beneficial mutations in plants with chemicals or radiation to improve yields, and the mechanization of agriculture have all increased the amount of food that can be grown on each acre of land by as much as 10 times in the last 100 years.

These extraordinary increases must be doubled by 2050 if we are to continue to feed an expanding population. . . .


. . .


Myths about the dire effects of genetically modified foods on health and the environment abound, but they have not held up to scientific scrutiny. And, although many concerns have been expressed about the potential for unexpected consequences, the unexpected effects that have been observed so far have been benign. Contamination by carcinogenic fungal toxins, for example, is as much as 90 percent lower in insect-resistant genetically modified corn than in nonmodified corn. This is because the fungi that make the toxins follow insects boring into the plants. No insect holes, no fungi, no toxins.


. . .


Only big companies can muster the money necessary to navigate the regulatory thicket woven by the government's three oversight agencies: the E.P.A., the Department of Agriculture and the Food and Drug Administration.


. . .


. . . the evidence is in. These crop modification methods are not dangerous. The European Union has spent more than $425 million studying the safety of genetically modified crops over the past 25 years. Its recent, lengthy report on the matter can be summarized in one sentence: Crop modification by molecular methods is no more dangerous than crop modification by other methods. Serious scientific bodies that have analyzed the issue, including the National Academy of Sciences and the British Royal Society, have come to the same conclusion.



For the full commentary, see:

NINA V. FEDOROFF. "Engineering Food for All." The New York Times (Fri., August 19, 2011): A21.

(Note: ellipses added.)

(Note: the online version of the commentary was dated August 18, 2011.)







October 6, 2011

"Insanely Great" Entrepreneur Steve Jobs Wanted "a Chance to Change the World"



Steve Jobs died yesterday (Weds., October 5, 2011).

Jobs was an innovator of my favorite kind, what I call a "project entrepreneur." He showed us what excitement and progress is possible if we preserve the institutions that allow entrepreneurial capitalism to exist.

When he was recruiting John Sculley to leave Pepsi and join Apple, Jobs asked him: "Do you want to spend the rest of your life selling sugared water or do you want a chance to change the world?" (p. 90).

Steve Jobs wanted to change the world. He got the job done.


Source of quote of Jobs' question to Sculley:

Sculley, John, and John A. Byrne. Odyssey: Pepsi to Apple. paperback ed. New York: HarperCollins, 1988.






September 26, 2011

Solyndra Debacle Illustrates Why Feds Should Not Pick Tech Winners



The clip above is embedded from the Jon Stewart "The Daily Show" episode that was aired on Thurs., September 15, 2011.



Government "industrial policy" is likely to fail for many reasons. One is that the government decision makers are unlikely to know which future technologies will turn out to be the best ones. Another reason is that even if they know, government decision makers often decide based on what is politically expedient or what is beneficial to their friends.

Solyndra is a case in point, as Jon Stewart hilariously reveals.






September 22, 2011

Deregulation Revived Railroads



RailroadMogulsCartoon2011-08-08.jpg
















"ALL ABOARD: The Wasp magazine in 1881 lampooned railroad moguls as having regulators in the palms of their hands." Source of caricature: online version of the WSJ article quoted and cited below.




(p. C8) Mr. Klein has written thoroughly researched and scrupulously objective biographies of the previously much maligned Jay Gould and E.H. Harriman, remaking their public images by presenting them in full. Now he has published the third and final volume of his magisterial history of the Union Pacific railroad, taking the company from 1969 to the present day.

Union Pacific--the only one of the transcontinentals to remain in business under its original name--is now a flourishing business. Thanks to a series of mergers, it is one of the largest railroads in the world, with more than 37,000 miles of track across most of the American West. Thanks to its investment in new technology, it is also among the most efficient.

In 1969, though, the future of American railroading was in doubt as the industry struggled against competition from airplanes, automobiles and trucks--all of which were in effect heavily subsidized through the government's support for airports and the Interstate Highway System.

Another major factor in the decline of the railroads had been the stultifying hand of the Interstate Commerce Commission. The ICC had come into existence in the late 19th century to limit the often high-handed ways of the railroads as they wrestled with the difficult economics of an industry that has very high fixed costs. ( . . . .) But the ICC soon evolved into a cartel mechanism that discouraged innovation and wrapped the railroad industry in a cocoon of stultifying rules.

Mr. Klein notes that in 1975 he wrote a gloomy article about the sad state of an industry with a colorful past: "Unlike many other historical romances," he wrote back then, "the ending did not promise to be a happy one."

Fortunately, a deregulation movement that began under the Carter administration--yes, the Carter administration--limited the power of the ICC and then abolished it altogether. As Mr. Klein shows in the well-written "Union Pacific," the reduction of government interference left capitalism to work its magic and produce--with the help of dedicated and skillful management--the modern, efficient and profitable railroad that is the Union Pacific.



For the full review, see:

JOHN STEELE GORDON. "Tracks Across America." The Wall Street Journal (Sat., JUNE 11, 2011): C8.

(Note: ellipsis added.)


Book reviewed in the part of the review quoted above:

Klein, Maury. Union Pacific: The Reconfiguration: America's Greatest Railroad from 1969 to the Present. New York: Oxford University Press, USA, 2011.






September 20, 2011

"Mystified by an American Disdain for Its Own Business Culture"



HollandAndDavisProducersSomethingVentured2011-05-17.jpg "Paul Holland and Molly Davis, producers of a new documentary, "Something Ventured," that gives an admiring look at innovators and investors from the past." Source of caption and photo: online version of the NYT article quoted and cited below.


(p. B3) The film, "Something Ventured," is a frankly admiring look at those who went out on a limb to back upstarts like Atari, Cisco Systems, Genentech and Apple.


. . .


But the film's beating heart is captured by Tom Perkins, whose Kleiner Perkins Caufield & Byers company backed the gene-splicing technology of Genentech, among other things. "It's great if you can make money and change the world for the better at the same time," said Mr. Perkins, . . .

Other stars of "Something Ventured" include Nolan Bushnell of Atari; Sandy Lerner of Cisco; Jimmy Treybig of Tandem Computers; and a string of venture capitalists, among them Don Valentine, Dick Kramlich, and Arthur Rock.

Many who appear joined dozens of other business people to finance the picture's roughly $700,000 cost with contributions of a few thousand dollars each, Mr. Holland said.

In becoming involved, several participants said they wanted to rekindle an entrepreneurial spirit that had either waned or changed since the rough-and-tumble years when, by the film's telling, Atari was started with $250 but needed capital to push Pong, and Mr. Bushnell passed up a chance to own a third of Apple, started by his employee Steve Jobs, for $50,000.


. . .


Mr. Valentine, . . . , said entrepreneurship had not ended -- his company was a force behind Google -- but it is less often coming from those born in the United States.

"You don't understand what you have here" is a constant refrain, he said, from Southeast Asian and Indian innovators who are sometimes mystified by an American disdain for its own business culture.



For the full story, see:

MICHAEL CIEPLY . "A Film About Capitalism, and (Surprise) It's a Love Story." The New York Times, Week in Review Section (Sun., March 8, 2011): 8.

(Note: ellipses added.)

(Note: the online version of the story is dated March 7, 2011.)





September 16, 2011

Art Diamond Describes Honors Colloquium on Creative Destruction







The clip above is embedded from You Tube. It was recorded on July 6, 2011 in Mammel Hall, the location of the College of Business at the University of Nebraska at Omaha (UNO). I am grateful to Charley Reed of UNO University Relations for doing a great job of shooting and editing the clip.





September 12, 2011

From Inventor to Entrepreneur When No Company Would Distribute Weed Eater



BallasGeorgeWeedEaterInventer2011-08-08.jpg "George Ballas showed off in 1975 the original Weed Eater, a popcorn can rigged up with some wires." Source of caption and photo: online version of the WSJ obituary quoted and cited below.


(p. A5) George Ballas got his big idea after a poisonous snake bit a worker who was trimming his lawn with shears. The idea turned an old popcorn can, some wires and an edger into the Weed Eater.

Mr. Ballas, who died Saturday at age 85, was a dance instructor, developer, inventor and marketer who built hotels, patented an adjustable table and marketed an early portable phone.


. . .


Mr. Ballas said the idea for the Weed Eater came to him while he was in a car wash, contemplating the big rotating bristles that cleaned hard-to-reach corners yet somehow didn't scratch the finish.

Drawing from that inspiration, he rigged up an old popcorn can with some wires and hooked it to a rotating edger, and the first string trimmer was born.


. . .


He hired an engineer to design new models that substituted monofilament fishing line for wire and ran on electricity and gas. He dubbed it "Weed Eater" and held several patents on it.

When Mr. Ballas failed to find a company interested in distributing the device, he decided to sell it himself.


. . .


Mr. Ballas also taught entrepreneurship at Rice University in Houston. He continued to tinker with new inventions, and at one point marketed a football-helmet-sized portable phone that found few takers.

"A Weed Eater," Mr. Ballas told the Houston Chronicle in 1993, "comes along once in a lifetime."



For the full obituary, see:

STEPHEN MILLER. "REMEMBRANCES; Dance Studio Owner Invented Weed Eater." The Wall Street Journal (Thurs., JUNE 30, 2011): A5.

(Note: ellipses added.)





August 29, 2011

In 1880s Prices Fell Because of Technological Progress



RecentEconomicChangesBK.jpg
















Source of book image: http://covers.openlibrary.org/b/id/5764338-L.jpg







Michael Perelman has strongly suggested that I read David Well's book. It is on my "to do" list.



(p. C10) The dull title of "Recent Economic Changes" does no justice to David A. Wells's fascinating contemporary account of a deflationary miasma that settled over the world's advanced economies in the 1880s. His cheery conclusion: Prices were falling because technology was progressing. What had pushed the price of a bushel of wheat down to 67 cents in 1887 from $1.10 in 1882 was nothing more sinister than the opening up of new regions to cultivation (Australia, the Dakotas) and astounding improvements in agricultural machinery.


For the full review, see:

JAMES GRANT. "FIVE BEST; Little-Known Gold From the Gilded Age." The Wall Street Journal (Sat., AUGUST 6, 2011): C10.


Source of book under review:

Wells, David A. Recent Economic Changes and Their Effect on Production and Distribution of Wealth and Well-Being of Society. New York: D. Appleton and Co., 1889.


Michael Perelman argues that in Recent Economic Changes, David Wells anticipates the substance, although not the wording, of Schumpeter's "creative destruction":

Perelman, Michael. "Schumpeter, David Wells, and Creative Destruction." The Journal of Economic Perspectives 9, no. 3 (Summer 1995): 189-97.





August 22, 2011

Gas Lighting Did Not Appeal to Those Who Had Servants to Light Their Candles




(p. 123) Gas was particularly popular in America and Britain. By 1850 it was available in most large cities in both countries. Gas remained, however, a (p. 124) middle-class indulgence. The poor couldn't afford it and the rich tended to disdain it, partly because of the cost and disruption of installing it and partly because of the damage it did to paintings and precious fabrics, and partly because when you have servants to do everything for you already there isn't the same urgency to invest in further conveniences. The ironic upshot, as Mark Girouard has noted, is that not only middle-class homes but institutions like lunatic asylums and prisons tended to be better lit - and, come to that, better warmed - long before England's stateliest homes were.



Source:

Bryson, Bill. At Home: A Short History of Private Life. New York: Doubleday, 2010.





August 18, 2011

"How Painfully Dim the World Was before Electricity"




(p. 112) We forget just how painfully dim the world was before electricity. A candle - a good candle - provides barely a hundredth of the illumination of a single 100-watt light bulb. Open your refrigerator door and you summon forth more light than the total amount enjoyed by most households in the eighteenth century. The world at night for much of history was a very dark place indeed.


Source:

Bryson, Bill. At Home: A Short History of Private Life. New York: Doubleday, 2010.





July 18, 2011

"If We Can't Win on Quality, We Shouldn't Win at All"



ImFeelingLuckyBK.jpg












Source of book image: online version of the WSJ review quoted and cited below.






(p. A13) At the tail end of the 1990s dot-com boom, Douglas Edwards took a gamble: He left his marketing job at an old-media company, taking a $25,000 salary cut to start work at a small, little-known Internet concern in its second year of operation. That his new employer was losing money and burning through venture capital went without saying. But unlike the footloose 20-somethings who usually populated Silicon Valley start-ups, Mr. Edwards had little margin to bet wrong; he was 41, with a mortgage, three children and a worried wife. He hoped he could get his old job back if the company ran out of money.


. . .


Mr. Edwards came to his job as a subscriber to the conventional wisdom. In an early presentation to cofounder Larry Page and others, Mr. Edwards unwisely declared that only marketing, not technology, could set Google apart. "In a world where all search engines are equal," he asserted, "we'll need to rely on branding to differentiate us from our competitors."

The room became quiet. Then Mr. Page spoke up. "If we can't win on quality," he said, "we shouldn't win at all."



For the full review, see:

DAVID A. PRICE. "BOOKSHELF; How Google Got Going; Branding, shmanding, a marketer was told. 'If we can't win on quality,' Larry Page said, 'we shouldn't win at all.'" The Wall Street Journal (Tues., July 12, 2011): A13.

(Note: ellipsis added.)


Book being reviewed:

Edwards, Douglas. I'm Feeling Lucky: The Confessions of Google Employee Number 59. New York: Houghton Mifflin Harcourt Publishing Co., 2011.






June 17, 2011

"Big Money Is Dumb Money"




"Other People's Money" is a short story that appears in Cory Doctorow's short story collection With a Little Help.


(p. C7) Venture capitalists? Forget them, says "Other People's Money." Big money is dumb money. Much easier, says one old-lady manufacturer to a smart young gigafund manager, for her to make and market her own product, and keep the money (just like Mr. Doctorow), than for him to find and fund a hundred products and take a rake-off. He only deals in six-figure multiples, and that's no good: not nimble enough. And he has to get a return on all those billions, poor outdated soul.


For the full review, see:

TOM SHIPPEY. "The Author as Agent of Change; Cory Doctorow has big ideas about the future of technology--and how it can empower writers." The New York Times (Sat., MAY 21, 2011): C7.

The book of short stories is:

Doctorow, Cory. With a Little Help.






June 12, 2011

To Burst Higher Ed Bubble, Peter Thiel Pays Students to Drop Out



ThielPeterPayPal2011-06-02.jpg













"Peter Thiel." Source of caption and photo: online version of the NYT article quoted and cited below.




(p. B4) Parents, do you hope that your children have the chance to become like Peter Thiel, the PayPal co-founder, Facebook investor and hedge fund manager? If so, Mr. Thiel suggests that you encourage them to drop out of school. In fact, he will help by paying them to do it.

On Wednesday, the Thiel Foundation, funded by Mr. Thiel, announced the first group of Thiel Fellows, 24 people under 20 who have agreed to drop out of school in exchange for a $100,000 grant and mentorship to start a tech company.

More than 400 people applied. The winners include Laura Deming, 17, who is developing antiaging therapies; Faheem Zaman, 18, who is building mobile payment systems for developing countries; and John Burnham, 18, who is working on extracting minerals from asteroids and comets.


. . .


Mr. Thiel, a contrarian investor and libertarian known for his controversial views, knows that suggesting that education is not always worth it strikes at the core of many Americans' beliefs. But that is exactly why is he doing it.

"We're not saying that everybody should drop out of college," he said. The fellows agree to stop getting a formal education for two years but can always go back to school. The problem, he said, is that "in our society the default assumption is that everybody has to go to college."

"I believe you have a bubble whenever you have something that's overvalued and intensely believed," Mr. Thiel said. "In education, you have this clear price escalation without incredible improvement in the product. At the same time you have this incredible intensity of belief that this is what people have to do. In that way it seems very similar in some ways to the housing bubble and the tech bubble."


. . .


"What I really liked about this program is it's giving a lot of people who maybe wouldn't get into Harvard an opportunity to participate in something just as selective and just as valuable and just as educational," Mr. Burnham said. "It's giving them that opportunity even though their personalities and characters don't quite fit the academic mold."

His father, Stephen Burnham, said the decision for his son to skip college, at least for now, was uncontroversial.

"There's a lot of other stuff that you get in college and I would say that would be useful for John," he said. "But I would say in four years there's a big opportunity cost there if you could be out starting your career doing something that could change the world."



For the full story, see:

CLAIRE CAIN MILLER. "Changing the World by Dropping Out." The New York Times (Mon., May 30, 2011): B4.

(Note: ellipses added.)

(Note: the online version of the story is dated May 25 (sic), 2011, has the title "Want Success in Silicon Valley? Drop Out of School," and is longer than the published version. Most of what is quoted above appears in both the published and online versions, but some (most notably the paragraph on the education bubble and the quotes from Stephen Burnham) appear only in the online verison.)





June 9, 2011

"Progress Depended on the Empirical Habit of Thought"



In the passage below from 1984 Orwell presents an underground rebel's account of why the authoritarian socialist dystopia cannot advance in science and technology.


(p. 155) The world of today is a bare, hungry, dilapidated place compared with the world that existed before 1914, and still more so if compared with the imaginary future to which the people of that period looked forward. In the early twentieth century, the vision of a future society unbelievably rich, leisured, orderly, and efficient--a glittering (p. 156) antiseptic world of glass and steel and snow-white concrete--was part of the consciousness of nearly every literate person. Science and technology were developing at a prodigious speed, and it seemed natural to assume that they would go on developing. This failed to happen, partly because of the impoverishment caused by a long series of wars and revolutions, partly because scientific and technical progress depended on the empirical habit of thought, which could not survive in a strictly regimented society.



Source:

Orwell, George. Nineteen Eighty-Four. New York: The New American Library, 1961 [1949].

By Canadian law, 1984 is no longer under copyright. The text has been posted on the following Canadian web site: http://wikilivres.info/wiki/Nineteen_Eighty-Four





June 8, 2011

Home Decorators Are Stockpiling Incandescent Bulbs to Thwart Feds' Edict



BrooksDavidJustBulbs2011-06-02.jpg

"David Brooks, of Just Bulbs in Manhattan, has a customer who is secretly ordering thousands of incandescent bulbs. "She doesn't want her husband to know," he said." Source of caption and photo: online version of the NYT article quoted and cited below.


(p. D1) BUNNY WILLIAMS, the no-nonsense decorator known for her lush English-style rooms, is laying in light bulbs like canned goods. Incandescent bulbs, that is -- 60 and 75 watters -- because she likes a double-cluster lamp with a high- and a low-watt bulb, one for reading, one for mood.

"Every time I go to Costco, I buy more wattage," Ms. Williams said the other day. She is as green as anybody, she added, but she can't abide the sickly hue of a twisty compact fluorescent bulb, though she's tried warming it up with shade liners in creams and pinks. Nor does she care for the cool blue of an LED.

It should be noted that, like most decorators, Ms. Williams is extremely precise about light. The other day, she reported, she spent six hours fine-tuning the lighting plan of a project, tweaking the mix of ambient, directional and overhead light she had designed, and returning to the house after dusk to add wattage and switch out lamps like a chef adjusting the flavors in a complicated bouillabaisse.

She is aware that there is legislation that is going to affect the manufacture of incandescent bulbs, but she's not clear on the details, and she wants to make sure she has what she needs when she needs it.


. . .


(p. D7) Other hoarders are hiding their behavior. David Brooks, who owns Just Bulbs on East 60th Street, said he has a customer in Tennessee who is buying up 60- and 100-watt soft-pink incandescent bulbs from G.E. and Sylvania for her three houses. Initially, she ordered 432 bulbs for each house, he said. Then she ordered another 1,000.

Mr. Brooks said the customer doesn't want her husband to find out, and wouldn't agree to speak to this reporter. The last order is destined, he said, "for a friend's house that she is helping to redecorate in Alabama. She doesn't want anyone to know her source."



For the full story, see:

PENELOPE GREEN. "Light Bulb Saving Time." The New York Times (Thurs., May 26, 2011): D1 & D7.

(Note: ellipsis added.)

(Note: the online version of the story is dated May 25, 2011.)





May 19, 2011

Entrepreneur Ken Olsen Was First Lionized and Then Chastised



OlsenKenObit2011-05-16.jpg"Ken Olsen, the pioneering founder of DEC, in 1996." Source of caption and photo: online version of the NYT article quoted and cited below.


I believe in The Road Ahead, Bill Gates describes Ken Olsen as one of his boyhood heroes for having created a computer that could compete with the IBM mainframe. His hero failed to prosper when the next big thing came along, the PC. Gates was determined that he would avoid his hero's fate, and so he threw his efforts toward the internet when the internet became the next big thing.

Christensen sometimes uses the fall of minicomputers, like Olsen's Dec, to PCs as a prime example of disruptive innovation, e.g., in his lectures on disruptive innovation available online through Harvard. A nice intro lecture is viewable (but only using Internet Explorer) at: http://gsb.hbs.edu/fss/previews/christensen/start.html



(p. A22) Ken Olsen, who helped reshape the computer industry as a founder of the Digital Equipment Corporation, at one time the world's second-largest computer company, died on Sunday. He was 84.


. . .


Mr. Olsen, who was proclaimed "America's most successful entrepreneur" by Fortune magazine in 1986, built Digital on $70,000 in seed money, founding it with a partner in 1957 in the small Boston suburb of Maynard, Mass. With Mr. Olsen as its chief executive, it grew to employ more than 120,000 people at operations in more than 95 countries, surpassed in size only by I.B.M.

At its peak, in the late 1980s, Digital had $14 billion in sales and ranked among the most profitable companies in the nation.

But its fortunes soon declined after Digital began missing out on some critical market shifts, particularly toward the personal computer. Mr. Olsen was criticized as autocratic and resistant to new trends. "The personal computer will fall flat on its face in business," he said at one point. And in July 1992, the company's board forced him to resign.



For the full obituary, see:

GLENN RIFKIN. "Ken Olsen, Founder of the Digital Equipment Corporation, Dies at 84." The New York Times (Tues., February 8, 2011): A22.

(Note: ellipsis added.)

(Note: the online version of the story is dated February 7, 2011 and has the title "Ken Olsen, Who Built DEC Into a Power, Dies at 84.")


Gates writes in autobiographical mode in the first few chapters of:

Gates, Bill. The Road Ahead. New York: Viking Penguin, 1995.


Christensen's mature account of disruptive innovation is best elaborated in:

Christensen, Clayton M., and Michael E. Raynor. The Innovator's Solution: Creating and Sustaining Successful Growth. Boston, MA: Harvard Business School Press, 2003.





May 18, 2011

"For the First 40 Years of Indian Independence, Entrepreneurs . . . Were Looked Down Upon"



(p. 8) Saurabh Srivastava, co-founder of the National Association of Software and Service Companies in India, explained that for the first 40 years of Indian independence, entrepreneurs here were looked down upon. India had lost confidence in its ability to compete, so it opted for protectionism. But when the '90s rolled around, and India's government was almost bankrupt, India's technology industry was able to get the government to open up the economy, in part by citing the example of America and Silicon Valley. India has flourished ever since.

"America," said Srivastava, "was the one who said to us: 'You have to go for meritocracy. You don't have to produce everything yourselves. Go for free trade and open markets.' This has been the American national anthem, and we pushed our government to tune in to it. And just when they're beginning to learn how to hum it, you're changing the anthem. ... Our industry was the one pushing our government to open our markets for American imports, 100 percent foreign ownership of companies and tough copyright laws when it wasn't fashionable."

If America turns away from these values, he added, the socialist/protectionists among India's bureaucrats will use it to slow down any further opening of the Indian markets to U.S. exporters.



For the full commentary, see:

THOMAS L. FRIEDMAN. "It's Morning in India." The New York Times, Week in Review Section (Sun., October 31, 2010): 8.

(Note: the online version of the story is dated October 30, 2010.)






April 14, 2011

U.S. Citizens Choose Cars for 99% of Trips



(p. 92) America is a car culture and has been for almost a century, the phrase "traffic jam" dating to 1910, meaning we're stuck with car culture for the time being. In the United States, the number of trips taken on public transportation has since 1998 been rising more rapidly than trips taken in cars. But public transportation nevertheless cannot be a cure-all for traffic congestion, since only a total of 1 percent of all U.S. trips occur on public transit. Double the share, which would require notable effort and capital expense, and it's still only 2 percent. A car culture with a rising population and rising prosperity has little choice but to keep investing in roads and parking.


Source:

Easterbrook, Gregg. The Progress Paradox: How Life Gets Better While People Feel Worse. Paperback ed. New York: Random House, 2004.





March 20, 2011

"The Adventurous, Pioneering Spirit"



Jet_AgeBK.jpeg
















Source of book image: http://www.jetagebook.com/



(p. 30) "Jet Age" is ostensibly about the race between two companies and nations to commercialize a military technology and define a new era of air travel. There's Boeing with its back to the wall and its military contracts drying up, betting everything on passenger jets, pitted against de Havilland and the government-subsidized project meant to reclaim some of Britain's lost glory. . . .


. . .


But the book is really about the risk-taking essential for making any extreme endeavor common­place. "Jet Age" celebrates the managers, pilots, engineers, flight attendants and, yes, even passengers (for without passengers there is no business) who gambled everything so that we might cross oceans and continents in hours rather than days.

It is easy to forget, in this time of overcrowded flights, demoralizing security checks, embattled flight attendants and dwindling service, that risk was once embraced as a necessary, even desirable, part of flying. Quoted in the book, the celebrated aviator Lord Brabazon summed it up in post-accident testimony: "You know, and I know, the cause of this accident. It is due to the adventurous, pioneering spirit of our race. It has been like that in the past, it is like that in the present, and I hope it will be in the future."



For the full review, see:

MICHAEL BELFIORE. "Fatal Flaws." The New York Times Book Review (Sun., February 6, 2011): 30.

(Note: ellipses added.)

(Note: the online version of the article is dated February 4, 2011.)


The book under review is:

Verhovek, Sam Howe. Jet Age: The Comet, the 707, and the Race to Shrink the World. New York: Avery, 2010.





March 7, 2011

Better Rails Were Needed Before Train Would "Work"



(p. 300) The other weight problem was the one that licked Trevithick at Penydarren: The tracks on which the locomotive ran were just not able to survive the tonnage traveling over them. Driving a five-ton steam locomotive over rails designed for horse-drawn carts was only slightly more sensible than driving a school bus over a bridge made of wet ice cubes. In both cases, it's a close call whether the vehicle will skid before or after the surface collapses.


. . .


(p. 301) Two years later, Stephenson, in collaboration with the ironmonger William Losh of Newcastle, produced, and in September 1816 jointly patented, a series of' improvements in wheels, suspension, and--most important--the method by which the rails and "chairs" connected one piece of track to another. Stephenson's rails seem mundane next to better-known eureka moments, but as much as any other innovation of the day they underline the importance of such micro-inventions in the making of a revolution. For it was the rails that finally made the entire network of devices--engine, linkage, wheel, and track--work.



Source:

Rosen, William. The Most Powerful Idea in the World: A Story of Steam, Industry, and Invention. New York: Random House, 2010.

(Note: ellipsis added.)





March 3, 2011

France Lacked Good Patent Laws; Great French Inventors "Died Penniless"



(p. 367) If one secret to sustaining an inventive culture was making inventors into national heroes, it was a secret that didn't translate well into French. Between 1740 and 1780, the French inclination to reward inventors not by enforcing a natural right but by the grant of pensions and prizes resulted in the award of nearly 7 million livres--approximately $600 million today--to inventors of largely forgot-(p. 268)ten devices, but Claude-François Jouffroy d'Abbans (inventor of one of the first working steamboats), Barthélemy Thimonnier (creator of the first sewing machine), and Airné Argand (a partner of Boulton and friend of Watt whose oil lamp became the world's standard) all died penniless.


Source:

Rosen, William. The Most Powerful Idea in the World: A Story of Steam, Industry, and Invention. New York: Random House, 2010.





February 28, 2011

Kappos Says Private Company Would Have Run Patent Office Better



KapposDavidPatent2011-02-27.jpg "David Kappos of the Patent Office, with an Edison bulb." Source of caption and photo: online version of the NYT article quoted and cited below.


(p. A1) "There is no company I know of that would have permitted its information technology to get into the state we're in," David J. Kappos, who 18 months ago became director of the Patent and Trademark Office and undersecretary of commerce for intellectual property, said in a recent interview. "If it had, the C.E.O. would have been fired, the board would have been thrown out, and you would have had shareholder lawsuits."

Once patent applications are in the system, they sit -- for years. The patent office's pipeline is so clogged it takes two years for an inventor to get an initial ruling, and an additional year or more before a patent is finally issued.

The delays and inefficiencies are more than a nuisance for inventors. Patentable ideas are the basis for many start-up companies and small businesses. Venture capitalists often require start-ups to have a patent before offering financing. That means that patent delays cost jobs, slow the economy and threaten the ability of American companies to compete with foreign businesses.



For the full story, see:

EDWARD WYATT. "U.S. Sets 21st-Century Goal: Building a Better Patent Office." The New York Times (Mon., February 21, 2011): A1 & A3.

(Note: the online version of the article is dated February 20, 2011.)





February 27, 2011

Patent Importance Survives the Results of Moser's Worlds Fairs Data Analysis



(p. 264) Petra Moser, now a professor at MIT's Sloan School of Management, spent four years examining more than 15,000 different inventions exhibited at nineteenth-century worlds fairs, and their equivalents, and discovered a fact that seems at first glance to discredit the idea that patent protection was essential for innovation: Nations without patent laws were in many cases just as inventive as those with them. Or even more inventive; some of the nations best represented at those industrial fairs actively discouraged the patenting of inventions.

The reason seems to be that whether or not they enforced a patent law, smaller nations or domains, such as the Netherlands and Switzerland, were vulnerable to the theft of their innovations by competitors in larger nations. The bargain of patent protection runs two ways: The state, in return for making an idea public, offers legal recourse to its creator should someone within the state steal the idea. Since making one's invention public in a nation with patent protection offered protection against theft only up to its own borders, only a large nation offered a large enough market to make the deal a good one, and (in Moser's words) the small nations "would have been silly to patent [their] innovations."

This logic inhibited investment in entire categories of innovation. Those nations that relied on secrecy rather than patent tended to specialize in the sort of inventions that cannot be easily reverse--engineered, such as chemicals or dyes.



Source:

Rosen, William. The Most Powerful Idea in the World: A Story of Steam, Industry, and Invention. New York: Random House, 2010.

(Note: italics and bracketed word in original.)





February 23, 2011

Chinese Encyclopedia Was Burned to Protect Monopolies Granted by Emperor



(p. 262) As with Tudor England, government monopoly of patronage meant control. Virtually all copies of the seventeenth--century Chinese encyclopedia, the T'ien Kung K'ai-wu or Exploitation of the Works of Nature, which included illustrations of everything from hydraulics to metallurgy, were destroyed because, according to Joseph Needham, much of the material touched on industries that had been granted monopoly status by the Qing emperors: "The absence of political competition did not mean that technological progress could not take place, but it did mean that one decision-(p. 263)maker [i.e. the Emperor] could deal it a mortal blow." It is therefore no surprise that a high percentage of both the inventions and inventors we associate with China from the time of the Han Dynasty to the Qings were government sponsored and employed.

Another liability of a strong central government is that it is, well, strong. Europe's fragmented system of sovereign states made it possible for innovative minds such as Paracelsus, Leibniz. Rousseau, and Voltaire to "shop" for more congenial places whenever they skated too close to heretical or otherwise challenging notions; in China, one had to travel a thousand miles to a place where the empire's writ ran not.



Source:

Rosen, William. The Most Powerful Idea in the World: A Story of Steam, Industry, and Invention. New York: Random House, 2010.

(Note: italics and bracketed words in original.)





February 20, 2011

Did Bell, or Gray, Invent the Telephone?



TheTelephoneGambitBK2011-02-05.jpg













Source of book image: http://www.xconomy.com/wordpress/wp-content/images/2008/01/telephone-gambit.jpg




A great and important debate is occurring about the desirability of the patent system. Should it be abolished, or reformed? If The Telephone Gambit book is right, one of the spectacular failures of the system is in the awarding of a patent to Bell for the telephone.

That's a big "if": some of the reviewers on Amazon give reasons for doubting Shulman's story.

I hope to have time to look into this further.


(p. D10) It was a brilliant concept. But was it Bell's? What had happened during his trip to Washington that allowed Bell to abandon the blind alleys he had been exploring and to suddenly, not incrementally, find the technological solution?

The answer to that question is a tale involving high-powered Washington lawyers, political influence, a patent clerk with a booze problem, and improper access to Elisha Gray's patent filing, where Bell found the secret to making the telephone work. Mr. Shulman lays out the evidence -- documentary, scientific, chronological and psychological -- piece by damning piece. He shows most impressively how Bell's subsequent behavior and actions are entirely in keeping with those of a decent and honorable man having to live most of his long life (Bell died in 1924) with the knowledge that behind his fortune and his fame lay a single instance of brazen dishonesty, of intellectual theft.

"The Telephone Gambit" is solid history, and Seth Shulman makes it as much fun to read as an Agatha Christie whodunit by using the techniques of historiography the way Hercule Poirot used his "little gray cells." That's no small accomplishment.




For the full review, see:

JOHN STEELE GORDON. "False Claim, Future Fortune." The Wall Street Journal (Fri., JANUARY 16, 2008): D10.

(Note: ellipsis added.)


The book being reviewed, is:

Shulman, Seth. The Telephone Gambit: Chasing Alexander Graham Bell's Secret. hardback ed. New York: W. W. Norton & Company, 2008.





February 13, 2011

Internet Enabled Creative Destruction



(p. R4) To understand the challenges that faced businesses the past 10 years, consider the household names that didn't make it through the decade: Anheuser-Busch, Compaq, Gillette, Enron, Lehman Brothers, Merrill Lynch, WorldCom.


. . .


As the decade rolled on, the Internet came to be known for destroying businesses. It upended decades-old business models in fields such as media, advertising, travel and entertainment, as consumers and advertisers migrated to the digital world.

But that same shift created opportunity. No one epitomized that better than Google Inc. A mere 15 months old at the beginning of the decade, it morphed from a startup technology company into an advertising and media powerhouse and is now plotting a move into communications. There, it will clash with Apple Inc., which was reborn following the return of co-founder Steve Jobs in 1997. Apple's iPod and iTunes reshaped the music industry; its iPhone revolutionized communications by opening itself to independent innovators.

"This is what [Austrian economist Joseph] Schumpeter had in mind with his term 'creative destruction,'" says Paul David, an economic historian at Stanford University. Industrial collapse is a "messy, messy process," Mr. David says. "It's a great drama, and watching it play out in this decade has been very interesting."



For the full story, see:

SCOTT THURM. "Creativity, Meet Destruction; The Decade Rewrote the Corporate Handbook, Thanks to the Web, Globalization and the Collapse of Two Bubbles." The Wall Street Journal (Mon., DECEMBER 21, 2009): R4.

(Note: ellipsis added.)

(Note: the online version of the article is dated DECEMBER 22, 2009.)





January 29, 2011

"It Isn't the Consumers' Job to Know What They Want"



iPadChild2011-01-21.jpg "Steven P. Jobs has played a significant role in a string of successful products at Apple, including the iPad, shown above, which was introduced last year." Source of caption and photo: online version of the NYT article quoted and cited below.


(p. B1) Shortly before the iPad tablet went on sale last year, Steven P. Jobs showed off Apple's latest creation to a small group of journalists. One asked what consumer and market research Apple had done to guide the development of the new product.

"None," Mr. Jobs replied. "It isn't the consumers' job to know what they want."

For years, and across a career, knowing what consumers want has been the self-appointed task of Mr. Jobs, Apple's charismatic co-founder. Though he has not always been right, his string of successes at Apple is uncanny. His biggest user-pleasing hits include the Macintosh, the iMac, iBook, iPod, iPhone and iPad.

But as he takes a medical leave of absence, announced on Monday, the question is: Without him at the helm, can Apple continue its streak of innovation, particularly in an industry where rapid-fire product cycles can make today's leader tomorrow's laggard?


. . .


(p. B4) With the iPad tablet, Apple jump-started a product category. But with the iPod (a music and media player) and iPhone (smartphone), Apple moved into markets with many millions of users using rival products, but he gave consumers a much improved experience.

"These are seeing-around-the-corner innovations," said John Kao, an innovation consultant to corporations and governments. "Steve Jobs is totally tuned into what consumers want. But these are not the kind of breakthroughs that market research, where you are asking people's opinions, really help you make."

Regis McKenna, a Silicon Valley investor and marketing consultant, said employees at Apple stores provide the company with a powerful window into user habits and needs, even if it is not conventional market research.

"Steve visits the Apple store in Palo Alto frequently," said Mr. McKenna, a former consultant to Apple.


. . .


In a conversation years ago, Mr. Jobs said he was disturbed when he heard young entrepreneurs in Silicon Valley use the term "exit strategy" -- a quick, lucrative sale of a start-up. It was a small ambition, Mr. Jobs said, instead of trying to build companies that last for decades, if not a century or more.

That was a sentiment, Mr. Jobs said, that he shared with his sometime luncheon companion, Andrew S. Grove, then the chief executive of Intel.

"There are builders and traders," Mr. Grove said on Tuesday. "Steve Jobs is a builder."



For the full story, see:

STEVE LOHR. "The Missing Tastemaker?" The New York Times (Weds., JANUARY 19, 2011): B1 & B4.

(Note: ellipses added.)

(Note: the online version of the article is dated January 18, 2011 and has the title "Can Apple Find More Hits Without Its Tastemaker?.")





January 26, 2011

REVISE THIS ONE: Patents Needed to Provide Money for "the Many Fruitless Experiments"



(p. 234) . . . ; together, Watt and Arkwright wrote a manuscript entitled "Heads of a Bill to explain and amend the laws relative to Letters Patent and grants of privileges for new inventions," essentially a reworking of Coke's Statute of 1623 that had created England's first patent law. In addition to its policy prescriptions, which were largely an unsuccessful argument against the requirement that patent applications be (p. 235) as specific as possible, the manuscript offered a remarkable insight into Watt's perspective on the life of the inventor, who should, in Watt's own (perhaps inadvertently revealing) words, "be considered an Infant, who cannot guard his own Rights":

An engineer's life without patent is not worthwhile . . . few men of ingenuity make fortunes without suffering to think seriously whether the article he manufactures might, or might not, be Improved. The man of ingenuity in order to succeed must seclude himself from Society, he must devote the whole powers of his mind to that one object, he must persevere in spite of the many fruitless experiments he makes, and he must apply money to the expenses of these experiments, which strict Prudence would dedicate to other purposes. By seclusion from the world he becomes ignorant of its manners, and unable to grapple with the more artful tradesman, who has applied the powers of his mind, not to the improvement of the commodity he deals in, but to the means of buying cheap and selling dear, or to the still less laudable purpose of oppressing such ingenious workmen as their ill fate may have thrown into his power.


Source:

Rosen, William. The Most Powerful Idea in the World: A Story of Steam, Industry, and Invention. New York: Random House, 2010.

(Note: the second ellipsis and the italics in original; the first ellipsis added.)





January 24, 2011

Fluorescent Bulbs Burn Out Much Faster than Utility Predicted



(p. A5) When it set up its bulb program in 2006, PG&E Corp. thought its customers would buy 53 million compact fluorescent bulbs by 2008. It allotted $92 million for rebates, the most of any utility in the state. Researchers hired by the California Public Utilities Commission concluded earlier this year that fewer bulbs were sold, fewer were screwed in, and they saved less energy than PG&E anticipated.

As a result of these and other adjustments, energy savings attributed to PG&E were pegged at 451.6 million kilowatt hours by regulators, or 73% less than the 1.7 billion kilowatt hours projected by PG&E for the 2006-2008 program.

One hitch was the compact-fluorescent burnout rate. When PG&E began its 2006-2008 program, it figured the useful life of each bulb would be 9.4 years. Now, with experience, it has cut the estimate to 6.3 years, which limits the energy savings. Field tests show higher burnout rates in certain locations, such as bathrooms and in recessed lighting. Turning them on and off a lot also appears to impair longevity.



For the full story, see:

REBECCA SMITH. "The New Light Bulbs Lose a Little Shine; Compact Fluorescent Lamps Burn Out Faster Than Expected, Limiting Energy Savings in California's Efficiency Program." The Wall Street Journal (Weds., JANUARY 19, 2011): A5.





January 22, 2011

When Yarn Was Scarce There Was Less Incentive to Develop Power Looms



(p. 223) Though power looms had existed, at least in concept, for centuries (under his sketch for one, Leonardo himself wrote, "This is second only to the printing press in importance; no less useful in its practical application; a lucrative, beautiful, and subtle invention"), there was little interest in them so long as virtually all the available yarn could be turned into cloth in cottages. This fact reinforced the weaver's independence; but it also encouraged another group of innovative types who were getting ready to put spinning itself on an industrial footing.


Source:

Rosen, William. The Most Powerful Idea in the World: A Story of Steam, Industry, and Invention. New York: Random House, 2010.





January 18, 2011

Artisan's Skills Were Still Required for Kay's Flying Shuttle



(p. 223) Kay's flying shuttle made it possible for weavers to produce a wider product, which they called "broadloom," but doing so was demanding. Weaving requires that the weft threads be under constant tension in order to make certain that each one is precisely the same length as its predecessor; slack is the enemy of a properly woven cloth. Using a flying shuttle to carry weft threads through the warp made it possible to weave a far wider bolt of cloth, but the required momentum introduced the possibility of a rebound, and thereby a slack thread. Kay's invention still needed a skilled artisan to catch the shuttle and so avoid even the slightest bit of bounce when it was thrown across the loom.


Source:

Rosen, William. The Most Powerful Idea in the World: A Story of Steam, Industry, and Invention. New York: Random House, 2010.





January 16, 2011

Cornucopians Win Another Bet with Malthusians



(p. D1) Five years ago, Matthew R. Simmons and I bet $5,000. It was a wager about the future of energy supplies -- a Malthusian pessimist versus a Cornucopian optimist -- and now the day of reckoning is nigh: Jan. 1, 2011.

The bet was occasioned by a cover article in August 2005 in The New York Times Magazine titled "The Breaking Point." It featured predictions of soaring oil prices from Mr. Simmons, who was a member of the Council on Foreign Relations, the head of a Houston investment bank specializing in the energy industry, and the author of "Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy."

I called Mr. Simmons to discuss a bet. To his credit -- and unlike some other Malthusians -- he was eager to back his predictions with cash. He expected the price of oil, then about $65 a barrel, to more than triple in the next five years, even after adjusting for inflation. He offered to bet $5,000 that the average price of oil over the course of 2010 would be at least $200 a barrel in 2005 dollars.

I took him up on it, not because I knew much about Saudi oil production or the other "peak oil" arguments that global production was headed downward. I was just following a rule learned from a mentor and a friend, the economist Julian L. Simon.

As the leader of the Cornucopians, the optimists who believed there would always be abundant supplies of energy and other resources, Julian figured that betting was the best way to make his argument. Optimism, he found, didn't make for cover stories and front-page headlines.


. . .


(p. D3) When I found a new bettor in 2005, the first person I told was Julian's widow, Rita Simon, a public affairs professor at American University. She was so happy to see Julian's tradition continue that she wanted to share the bet with me, so we each ended up each putting $2,500 against Mr. Simmons's $5,000.


. . .


The past year the price has rebounded, but the average for 2010 has been just under $80, which is the equivalent of about $71 in 2005 dollars -- a little higher than the $65 at the time of our bet, but far below the $200 threshold set by Mr. Simmons.

What lesson do we draw from this? I'd hoped to let Mr. Simmons give his view, but I'm very sorry to report that he died in August, at the age of 67. The colleagues handling his affairs reviewed the numbers last week and declared that Mr. Simmons's $5,000 should be awarded to me and to Rita Simon on Jan. 1, . . .



For the full commentary, see:

JOHN TIERNEY. "Findings; Economic Optimism? Yes, I'll Take That Bet." The New York Times (Tues., December 28, 2010): D1 & D3.

(Note: ellipses added.)

(Note: the online version of the article is dated December 27, 2010.)





January 10, 2011

London's Albion Mills Was "Likely" Destroyed By Millers' Arson



(p. 187) The Albion Mills, as it would be called, was built on a scale hitherto unimagined. The largest flour mill in London in 1783 used The Albion Mills, as it would be called, was built on a scale hitherto unimagined. The largest flour mill in London in 1783 used four pairs of grinding stones; Albion was to have thirty, driven by three steam engines, each with a 34-inch cylinder. Within months after its completion, in 1786, those engines were driving mills that produced six thousand bushels of flour every week--which both fed a lot of Londoners and angered a lot of millers.

The Albion Mills was London's first factory, and its first great symbol of industrialization; its construction inaugurated not only great age of steam-driven factories, but also the doomed though poignant resistance to them. That resistance took the shape of direct action--no one knows how the fire that destroyed the Albion Mills in 1791 began, but arson by millers threatened by its success seems likely-- . . .



Source:

Rosen, William. The Most Powerful Idea in the World: A Story of Steam, Industry, and Invention. New York: Random House, 2010.

(Note: ellipsis added.)





January 7, 2011

Trade Stats Count iPhone as Chinese Export, Despite Only 3.6% of iPhone Costs from China



iPhoneGlobalTradeGraph2011-01-02.jpgSource of graph: online version of the WSJ article quoted and cited below.


(p. B1) . . . two academic researchers estimate that Apple Inc.'s iPhone--one of the best-selling U.S. technology products--actually added $1.9 billion to the U.S. trade deficit with China last year.

How is this possible? The researchers say traditional ways of measuring global trade produce the number but fail to reflect the complexities of global commerce where the design, manufacturing and assembly of products often involve several countries.

"A distorted picture" is the result, they say, one that exaggerates trade imbalances between nations.

Trade statistics in both countries consider the iPhone a Chinese export to the U.S., even though it is entirely designed and owned by a U.S. company, and is made largely of parts produced in several Asian and European countries. China's contribution is the last step--assembling and shipping the phones.

So the entire $178.96 estimated wholesale cost of the shipped phone is credited to China, even though the value of the work performed by the Chinese workers at Hon Hai Precision Industry Co. accounts for just 3.6%, or $6.50, of the total, the researchers calculated in a report published this month.



For the full story, see:

ANDREW BATSON. "Not Really 'Made in China'; The iPhone's Complex Supply Chain Highlights Problems With Trade Statistics." The Wall Street Journal (Thurs., December 16, 2010): B1 & B2.

(Note: ellipsis added.)

(Note: the online version of the article is dated DECEMBER 15, 2010nd that were not in the print version.)


The research report breaking down iPhone costs by country is:

Xing, Yuqing, and Neal Detert. "How the Iphone Widens the United States Trade Deficit with the People's Republic of China." ADBI Working Paper Series, no. 257, December 2010.






December 22, 2010

Under Health Care 'Reform' the Total Cost of Health Care Will "Go through the Roof!"



BushJonathanAthenahealth2010-12-20.jpg










"Jonathan Bush, nephew of one former president and cousin of another, built a small medical practice into a national enterprise with nearly 1,200 employees." Source of caption and photo: online version of the NYT article quoted and cited below.




(p. B10) In the world of health care innovation, the founder and chief executive of Athenahealth has an outsize name. In part, that's because his name is Jonathan Bush, and he is the nephew of one former president and the cousin of another. But it's also because his company has mastered the intricacies of the doctor-insurer relationship and become a player in the emerging medical records industry.

Based in Watertown, Mass., Athenahealth offers a suite of administrative services for medical practices. It collects payments from insurers and patients, and it manages electronic health records and patient communication systems. All of this is done remotely through the Internet -- or "in the cloud," as Mr. Bush puts it. Doctors don't have to install or manage software or pay licensing fees; instead, Athenahealth keeps a percentage of the revenue.


. . .


Q. What's going on in the health care industry to deliver that kind of growth to you?

A. We are a disruptive technology. We are the only cloud-based service in an industry segment full of sclerotic, enormous, personality-free corporations that have been in business making 90 percent margins doing nothing for decades and decades.

Q. What keeps other companies from building cloud-based systems?

A. For software companies, the biggest barrier to entry is that they give up their business model. Those companies would get hammered on Wall Street if they started selling a service that they have to deliver at a loss for five years. In terms of new entrants, there are two things that we've done that would take a good decade to replicate. One, we've built out the health care Internet. We've been building connections into insurance companies and laboratories and hospital medical records for years and years and years.

And the other barrier to entry is that rules engine. Every time a doctor anywhere in the country gets a claim denied, we have analysts ask the Five Whys. When we get to root cause, we write a new rule into Athenanet and from that day on, no other doctor gets that particular denial from that particular insurance company ever again. We now know of 40 million ways that a doctor can have a claim denied in the United States. The average practice has to rework about 35 percent of their claims, and we only have to rework about 5 percent of ours.

Q. What's the prognosis for bill collecting under health care reform?

A. Well, there's going to be new connectors and a whole series of new insurance products that will be managed by the states' health insurance commissioners. And the law provides for every state to do all of these its own way, so they will have their own rules and regulations, and each state will do it differently. That sounds like springtime in Complexity Land.

Q. What do you think will happen to the total cost of health care under reform?

A. Oh, it's going to go through the roof! It's widely accepted that this is not a cost-reform bill -- it's an access bill. It's in fact a cost-expansion bill.



For the full story, see:

ROBB MANDELBAUM. "Views of Health Care Economics From a C.E.O. Named Bush." The New York Times (Thurs., September 9, 2010): B10.

(Note: ellipsis added.)

(Note: the online version of the article has the date September 8, 2010.)





December 21, 2010

The Hungry Innovate Because They Have Less to Lose



(p. 124) . . . , the eighteenth-century Swiss mathematician Daniel Bernoulli,'' who coined the term "human capital," explained why innovation has always been a more attractive occupation to have-nots than to haves: not only do small successes seem larger, but they have considerably less to lose.


Source:

Rosen, William. The Most Powerful Idea in the World: A Story of Steam, Industry, and Invention. New York: Random House, 2010.

(Note: ellipsis added.)





December 17, 2010

Financial Gain an Important Motive for Invention



(p. 121) In 1930, Joseph Rossman, who had served for decades as an examiner in the U.S. Patent Office, polled more than seven hundred patentees. producing a remarkable picture of the mind of the inventor. Some of the results were predictable; the three biggest motivators were "love of inventing," "desire to improve." and "financial gain," the ranking for each of which was statistically identical. and each at least twice as important as those appearing (p. 122) down the list, such as "desire to achieve," "prestige," or "altruism" (and certainly not the old saw, "laziness," which was named roughly one-thirtieth as frequently as "financial gain"). A century after Rocket, the world of technology had changed immensely: electric power, automobiles, telephones. But the motivations of individual inventors were indistinguishable from those inaugurated by the Industrial Revolution.


. . .


In the same vein, Rossman's survey revealed that the greatest obstacle perceived by his patentee universe was not lack of knowledge, legal difficulties, lack of time, or even prejudice against the innovation under consideration. Overwhelmingly, the largest obstacle faced by early twentieth-century inventors (and, almost certainly, their ancestors in the eighteenth century) was "lack of capital." Inventors need investors.



Source:

Rosen, William. The Most Powerful Idea in the World: A Story of Steam, Industry, and Invention. New York: Random House, 2010.

(Note: ellipsis added.)





December 3, 2010

If the Feds Want an Effective Stimulus, They Should Spend to Reduce the Patent Backlog



In my seminar on the Economics of Technology on Tuesday night (11/30/10), Gauri presented some interesting information on intellectual property. At one point she summarized that the lag in processing patents is about three years, but it takes, on average, only about 18 hours to process a patent once the processing has begun.

Later in the seminar, we talked about a brief article by Amar Bhidé on whether large economic stimulus programs have worked in the past, and will work in the present. Bhidé was skeptical, and I am too.

But it occurred to me that one modest economic stimulus expenditure might help. Why not make the highest stimulus spending priority to hire and train enough patent examiners to reduce the patent lag from three years to, say, three weeks?


The Bhidé article mentioned above is:

Bhidé, Amar. "Don't Believe the Stimulus Scaremongers." Wall Street Journal, (Tues., February 17, 2009): A15.






November 28, 2010

Whittle "Struggled for Years to Get Funding and Time to Pursue His Idea"



DeHavilandComet2010-11-14.jpg"When Britain Ruled The Skies: A De Havilland Comet under construction in Belfast in 1954." Source of caption and photo: online version of the WSJ review quoted and cited below.


(p. C8) Frank Whittle, the brilliant British military pilot and engineer who began patenting jet designs in 1930, struggled for years to get funding and time to pursue his idea. Even after World War II, when a competing Nazi design showed what fighter jets could achieve in battle, U.S. airlines were slow to see jets' potential for passenger travel.

It took another Brit, airplane designer Geoffrey de Havilland, to awaken postwar America's aviation behemoths. While Lockheed and Douglas were still churning out rumbling, low-flying propeller planes, De Havilland's jet-powered Comet began breaking records in 1952. Only after seeing Comets scorch the stratosphere at 500 miles an hour did Howard Hughes want jetliners for TWA and Juan Trippe get interested for Pan Am.

Among American plane makers, it was a military contractor that had struggled in the prewar passenger-plane market--Boeing--that first took up the jetliner challenge. In retrospect, the outcome seems obvious. The Boeing 707 inspired the term "jet set." Boeing's iconic 747 "Jumbo Jet" opened jet-setting to the masses.

But in 1952, that outcome was far from obvious. Mr. Verhovek zeroes in on the mid-1950s, when Comets first seemed to own the world and then started plunging from the sky in pieces. The Comet's fatal design flaw--the result of an insufficient appreciation of the danger of metal fatigue--holds resonance today as both Boeing and Airbus struggle to master the next generation of jetliner materials, composites of carbon fiber and plastic.


. . .


Although "Jet Age" inevitably centers on technology, Mr. Verhovek wisely focuses as well on the outsize personalities behind world-changing innovations. There's Mr. De Havilland, a manic depressive who was so dedicated to aviation that he kept going after two of his three sons died testing his planes. Mr. Whittle, we learn, sniffed Benzedrine to stay awake, popped tranquilizers to sleep and shriveled to just 127 pounds while developing the jet engine. And Boeing chief executive Bill Allen, a meticulous lawyer, bet the company on passenger jets when not a single U.S. airline wanted one.




For the full review, see:

DANIEL MICHAELS. "Shrinking the World; How jetliners commercialized air travel--stewardesses and all." The Wall Street Journal (Sat., October 9, 2010): C8.

(Note: ellipsis added.)


The book under review is:

Verhovek, Sam Howe. Jet Age: The Comet, the 707, and the Race to Shrink the World. New York: Avery, 2010.





November 27, 2010

Coke's Patent Law Motivated by Belief that Creative Craftsmen Were Source of Britain's Prosperity



William Rosen discusses the genesis and significance of the world's first patent law:


(p. 52) The Statute became law in 1624. The immediate impact was barely noticeable, like a pebble rolling down a gradual slope at the top of a snow-covered mountain. For decades, fewer than six patents were awarded annually, though still more in Britain than anywhere else. It was seventy-five years after the Statute was first drafted, on Monday, July 25, 1698, before an anonymous clerk in the employ of the Great Seal Patent Office on Southampton Row, three blocks from the present--day site of the British Museum, granted patent number 356: Thomas Savery's "new Invention for Raiseing of Water and occasioning Motion to all Sorts of Mill Work by the lmpellent Force of Fire."

Both the case law and the legislation under which the application was granted had been written by Edward Coke. Both were imperfect, as indeed was Savery's own engine. The law was vague enough (and Savery's grant wide-ranging enough; it essentially covered all ways for "Raiseing of Water" by fire) that Thomas Newcomen was compelled to form a partnership with a man whose machine scarcely resembled his own. But it is not too much to claim that Coke's pen had as decisive an impact on the evolution of steam power as any of Newcomen's tools. Though he spent most of his life as something of a sycophant to Elizabeth and James, Coke's philosophical and temperamental affinity for ordinary Englishmen, particularly the nation's artisans, compelled him to act, time and again, in their interests even when, as with his advocacy of the 1628 Petition of Right (an inspiration for the U.S. Bill of Rights) it landed him in the King's prisons. He became the greatest advocate for England's craftsmen, secure in the belief that they, not her landed gentry or her merchants, were the nation's source of prosperity. By understanding that it was England's duty, and--perhaps even more important--in England's interest, to promote the creative labors of her creative laborers, he anticipated an economic philosophy far more modern than he probably understood, and if he grew rich in the service of the nation, he also, with his creation of the world's first durable patent law, returned the favor.



Source:

Rosen, William. The Most Powerful Idea in the World: A Story of Steam, Industry, and Invention. New York: Random House, 2010.

(Note: italics in original.)





November 25, 2010

Neurosurgeons Treating Dogs is Mutually Beneficial to Dogs and Humans



(p. D3) An operation commonly performed to remove brain tumors from the pituitary glands of humans is now available to dogs, thanks to a collaboration between a neurosurgeon and some veterinarians in Los Angeles. And that is turning out to be good for humans.

So far, nine dogs and one cat that otherwise would have died have been treated successfully.


. . .


What Dr. Mamelak has gained from teaching the procedure to veterinarians is access to tissue samples from the treated dogs. That's significant because Cushing's afflicts only one in a million humans, making it a difficult disease to study. By contrast, it afflicts about 100,000 dogs a year in the United States. The canine tissue samples are enabling him and his colleagues to develop drugs to one day treat Cushing's disease in both humans and dogs.

"We have a full loop," he said. "We're using a human procedure in animals, and using their tissue to study the disease."



For the full story, see:

SINDYA N. BHANOO. "Observatory; They Fetch, They Roll Over, They Aid Tumor Research." The New York Times, Science Times Section (Tues., October 26, 2010): D3.

(Note: ellipsIs added.)

(Note: the online version of the article is dated October 22 (sic), 2010.)





November 23, 2010

When Inventors Could Get Patents that Were Durable and Enforceable, "the World Started to Change"



(p. 50) . . . Coke, who had . . . been made Lord Chief Justice of' England, drafted the 1623 "Act concerning Monopolies and Dispensations with penall Lawes and the Forfeyture thereof," or, as it has become known, the Statute on Monopolies. The Act was designed to promote the interests of artisans, and eliminate all traces of monopolies.

With a single, and critical, exception. Section 6 of the Statute, which forbade every other form of monopoly, carved out one area in which an exclusive franchise could still be granted: Patents could still be awarded to the person who introduced the invention to the realm--to the "first and true inventor."

This was a very big deal indeed, though not because it represented the first time inventors received patents. The Venetian Republic was offering some form of patent protection by 1471, and in 1593, the Netherlands' States-General awarded a patent to Mathys Siverts, for a new (and unnamed) navigational instrument. And, of course, Englishmen like John of Utynam had been receiving patents for inventions ever since Henry VI. The difference between Coke's statute and the customs in place before and elsewhere is that it was a law, with all that implied for its durability and its enforceability. Once only inventors could receive patents, the world started to change.



Source:

Rosen, William. The Most Powerful Idea in the World: A Story of Steam, Industry, and Invention. New York: Random House, 2010.

(Note: italics in original; ellipses added.)





November 22, 2010

Ice Entrepreneur Gorrie Died Dispirited for Lack of Funds



ConnectionsBK.jpg



















Source of book image:
http://ecx.images-amazon.com/images/I/51E2APGW55L._SS500_.jpg



(p. 241) In May of the following year [i.e., in May 1851] Gorrie obtained a patent for the first ice-making machine.


. . .


But he was unable to find adequate backing, and in 1855 he died, a broken and dispirited man.



Source:

Burke, James. Connections. New York, NY: Little, Brown, and Co., 1978.

(Note: ellipsis and bracketed information added.)





November 14, 2010

Steven Johnson Ignores Role of Market in Enabling Innovation



WhereGoodIdeasComeFromBK.jpg






Source of book image: online version of the WSJ review quoted and cited below.





Steven Johnson's The Ghost Map is one of my favorite books. I also enjoyed his The Invention of Air. I have not yet read his Where Good Ideas Come From. Based on the review quoted below, I do not expect to be as enthused about the new book.

I have read elsewhere that Johnson criticizes patents. If all would-be innovators were independently wealthy then innovation without patents might work. But William Rosen in The Most Powerful Idea in the World has recently shown that patents financed a key group of craftsmen who otherwise would not have been able to create the steam engines that powered the industrial revolution.

The issues are difficult and important---I will write more in a month or two after I have had a chance to read Johnson's book.


(p. A21) Mr. Johnson thinks that the adjacent possible explains why cities foster much more innovation than small towns: Cities abound with serendipitous connections. Industries, he says, may tend to cluster for the same reason. A lone company in the middle of nowhere has only the mental resources of its employees to fall back on. When there are hundreds of companies around, with workers more likely to change jobs, ideas can cross-fertilize.

The author outlines other factors that make innovation work: the tolerance of failure, as in Thomas Edison's inexorable process-of-elimination approach to finding a workable light-bulb filament; the way that ideas from one field can be transformed in another; and the power of information platforms to connect disparate data and research. "Where Good Ideas Come From" is filled with fascinating, if sometimes tangential, anecdotes from the history of entrepreneurship and scientific discovery. The result is that the book often seems less a grand theory of innovation than a collection of stories and theories about creativity that Steven Johnson happens to find interesting.

It turns out that Mr. Johnson himself has a big idea, but it's not a particularly incisive one: He proposes that competition and market forces are less important to innovation than openness and inspiration. The book includes a list of history's most important innovations and divides them along two axes: whether the inventor was working alone or in a network; and whether he was working for a market reward or for some other reason. Market-led innovations, it turns out, are in the minority.



For the full review, see:

MEGAN MCARDLE. "Serendipitous Connections; Innovation occurs when ideas from different people bang against each other." The Wall Street Journal (Tues., OCTOBER 5, 2010): A21.





November 9, 2010

If You Think Life Was Better in the Past, "Say One Single Word: Dentistry"



(p. 2) In general, life is better than it ever has been, and if you think that, in the past, there was some golden age of pleasure and plenty to which you would, if you were able, transport yourself, let me say one single word: "dentistry."


Source:

O'Rourke, P. J. All the Trouble in the World: The Lighter Side of Overpopulation, Famine, Ecological Disaster, Ethnic Hatred, Plague, and Poverty. paperback ed. New York: Atlantic Monthly Press, 1994.






November 2, 2010

William Rosen's "The Most Powerful Idea in the World"



Most-Powerful-Idea-in-the-WorldBK2010-10-24.jpg














Source of book image: http://ffbsccn.files.wordpress.com/2010/07/the-most-powerful-idea-in-the-world.jpg




The range of William Rosen's fascinating and useful book is very broad indeed. He is interested in THE question: why did the singular improvement in living standards known as the industrial revolution happen where and when it did?

The question is not just of historical interest---if we can figure out what caused the improvement then and there, we have a better shot at continuing to improve in the here and now.

I especially enjoyed and learned from William Rosen's discussion, examples and quotations on the difficult issue of whether patents are on balance a good or bad institution.

Deirdre McCloskey taught me that the most important part of a sentence is the last word, and the most important part of a paragraph is the last sentence, and the most important part of a chapter is the last paragraph.

Here are the last couple of sentences of Rosen's book:


(p. 324) Incised in the stone over the Herbert C. Hoover Building's north entrance is the legend that, with Lincoln's characteristic brevity, sums up the single most important idea in the world:

THE PATENT SYSTEM ADDED

THE FUEL OF INTEREST

TO THE FIRE OF GENIUS



In the next few weeks I will occasionally quote a few of the more illuminating passages from Rosen's well-written account.


Book discussed:

Rosen, William. The Most Powerful Idea in the World: A Story of Steam, Industry, and Invention. New York: Random House, 2010.





October 30, 2010

All He "Could See Was Cows and Farms" in "Virginia's High Tech Corner"



(p. A18) . . . government attempts to rejuvenate regional economies have a mixed track record, in the U.K. and elsewhere.

Stuart S. Rosenthal, an economics professor at Syracuse University, remembers driving through Virginia in 1997 and seeing a sign saying, "You are entering southwest Virginia's high tech corner."

"And all I could see was cows and farms," he said. Recent employment data shows that aside from one pocket, little has changed.



For the full story, see:

ALISTAIR MACDONALD. "U-Turn in the U.K.: Big Spending Cuts." The Wall Street Journal (Fri., OCTOBER 15, 2010): A18.

(Note: ellipsis added.)

(Note: the online version of the article is dated October 14, 2010.)





September 9, 2010

Jeff Bezos' Goal: "Earth's Biggest Selection"



BezonJeff2010-08-29.jpg



Jeff Bezos. Source of photo: online version of the NYT article quoted and cited below.





(p. 18) You're a longtime science buff who studied electrical engineering and computer science at Princeton. Why did you want to be a bookseller in the first place?
You have to go back in time to 1994, and there's something very unusual about the book category. There are more items in the book category than there are items in any other product category. One of the things it was obvious you could do with an online store is have a much more complete selection.



Initially, Amazon sold books exclusively, but it has since expanded into a retail omnivore that sells basketballs and vacuum cleaners and hamster food and everything under the sun. What is your goal, exactly?
We want to have earth's biggest selection. Earth's biggest river, earth's biggest selection.



For the full interview, see:

DEBORAH SOLOMON. "QUESTIONS FOR Jeffrey P. Bezos; Book Learning." The New York Times, Magazine Section (Sun., December 6, 2009): 18.

(Note: bold in original, to indicate questions by Deborah Solomon.)

(Note: the online version of the interview is dated December 2, 2009.)


.




August 16, 2010

Wozniak Could Only Predict a Year or Two Ahead in Technology



(p. 293) If you could easily predict the future, inventing things would be a lot easier! Predicting the future is difficult even if you're involved with products that are guiding computers, the way we were at Apple.

When I was at Apple in the l970s and 1980s, we would always try to look ahead and see where things were going. It was actually easy to see a year or two ahead, because we were the ones building the products and had all these contacts at other companies. But beyond that, it was tough to see. The only thing we could absolutely rely upon had to do with Moore's Law--the now-famous rule in electronics (named for Intel founder Gordon Moore) that says that every eighteen months you can pack twice the number of transistors on a chip.

That meant computers could keep getting smaller and cheaper. We saw that. But we had a hard time imagining what kinds of applications could take advantage of all this power. We didn't expect high-speed modems. We didn't expect computers to have large amounts of hard-disk storage built in. We didn't see the Internet growing out of the ARPANET and becoming accessible to everyone. Or digital cameras. We didn't see any of that. We really could only see what was right in front of us, a year or two out, max.



Source:

Wozniak, Steve, and Gina Smith. iWoz: Computer Geek to Cult Icon: How I Invented the Personal Computer, Co-Founded Apple, and Had Fun Doing It. New York: W. W. Norton & Co., 2006.





July 23, 2010

Commodore, Atari, and Some Venture Capitalists, Refused to Fund Jobs and Wozniak



(p. 196) After Commodore turned us down, we went over to Al Alcorn's house. He was one of the founders of Atari with Nolan Bushnell, and he was the one who'd hired Steve to do video games there two years before.

Now, I knew Al knew me. He knew I had designed Breakout, the one-player version of Pong. I remember that when we went to his house I was so impressed because he had one of the earliest color projection TVs. Man, in 1976, he would have been among the first people to have one. That was cool.

But he told us later that Atari was too busy with the video game market to do a computer project.

A few days after that, venture capitalists Steve had contacted started to come by. One of them was Don Valentine at Sequoia. He kind of pooh-poohed the way we talked about it.

He said, "What's the market?"

"About a million," I told him.

"How do you know?"

I told him the ham radio market had one million users, and this could be at least that big.

Well, he turned us down, but he did get us in touch with a guy named Mike Markkula. He was only thirty, he told us, but already retired from Intel. He was into gadgets, he told us. Maybe Mike would know what to do with us.



Source:

Wozniak, Steve, and Gina Smith. iWoz: Computer Geek to Cult Icon: How I Invented the Personal Computer, Co-Founded Apple, and Had Fun Doing It. New York: W. W. Norton & Co., 2006.





July 15, 2010

"Fun" and "Profits" as Motives for Entrepreneurship



(p. 184) After we started selling the boards to Paul Terrell--working day and night to get them to him on time--we had profits like I never imagined. Suddenly our little business was making more than I was making at HP. That wasn't very much, admittedly. But still, it was a lot. We were building the boxes for $220 and selling them wholesale to Paul Terrell for $500.

And, of course, we didn't need a ton of money to operate. I had a day job, so I looked at it as, Hey, cool. Extra money for pizza! As for Steve, he was living at home. I was twenty-five and he was only twenty-one at the time, so what expenses could we have, really? Apple didn't have to make that much to sustain itself and be ongoing. We weren't paying ourselves salaries or paying rent, after all. We didn't have any patents to pay for. Or lawyers. It was a small-time business, and we weren't worried that much about anything.

My dad, watching this, pointed out that we weren't actually making money because we weren't paying ourselves anything. But we didn't care, we were having too much fun.




But note, only several pages later:

(p. 194) Like I said before, we needed money. Steve knew it and I knew it.

So by that summer of 1976, we started talking to potential money people about Apple, showing them the Apple II working in color in Steve's garage.



Source:

Wozniak, Steve, and Gina Smith. iWoz: Computer Geek to Cult Icon: How I Invented the Personal Computer, Co-Founded Apple, and Had Fun Doing It. New York: W. W. Norton & Co., 2006.





July 13, 2010

More New Jobs Created Are Higher Skill Jobs



(p. A1) As unlikely as it would seem against this backdrop, manufacturers who want to expand find that hiring is not always easy. During the recession, domestic manufacturers appear to have accelerated the long-term move (p. A3) toward greater automation, laying off more of their lowest-skilled workers and replacing them with cheaper labor abroad.

Now they are looking to hire people who can operate sophisticated computerized machinery, follow complex blueprints and demonstrate higher math proficiency than was previously required of the typical assembly line worker.

Makers of innovative products like advanced medical devices and wind turbines are among those growing quickly and looking to hire, and they too need higher skills.


. . .


Manufacturers who profess to being shorthanded say they have retooled the way they make products, calling for higher-skilled employees. "It's not just what is being made," said David Autor, an economist at the Massachusetts Institute of Technology, "but to the degree that you make it at all, you make it differently."

In a survey last year of 779 industrial companies by the National Association of Manufacturers, the Manufacturing Institute and Deloitte, the accounting and consulting firm, 32 percent of companies reported "moderate to serious" skills shortages. Sixty-three percent of life science companies, and 45 percent of energy firms cited such shortages.




For the full story, see:

MOTOKO RICH. "Jobs Go Begging as Gap is Exposed in Worker Skills." The New York Times (Fri., July 1, 2010): A1 & A3.

(Note: ellipsis added.)

(Note: the online version of the article is dated July 1, 2010 and has the title "Factory Jobs Return, but Employers Find Skills Shortage.")





July 11, 2010

How HP Turned Down the Apple PC



Wozniak tells the story of how he offered to develop the PC within HP, but HP turned him down. The story seems highly compatible with the account of disruptive innovations given by Clayton Christensen.

Another aspect of the story is worth highlighting. Sometimes it is alleged, as e.g., with the Tucker auto story, that large incumbent corporations suppress innovations. But in this case, although HP did not want to develop the PC themselves, they did not try to keep Wozniak and Jobs from developing it on their own.


(p. 175) Before the partnership agreement was even inked, I realized something and told Steve. Because I worked at HP, I told him, everything I'd designed during the term of my employment contract belonged to HP.

Whether that upset Steve or not, I couldn't tell. But it didn't matter to me if he was upset about it. I believed it was my duty to tell HP about what I had designed while working for them. That was the right thing and the ethical thing. Plus, I really loved that company and I really did believe this was a product they should do. I knew that a guy named Miles Judd, three levels above me in the company structure, had managed an engineering group at an HP division in Colorado Springs that had developed a desktop computer.

It wasn't like ours at all--it was aimed at scientists and engineers and it was really expensive--but it was programmable in BASIC.

I told my boss, Pete Dickinson, that I had designed an inexpensive desktop computer that could sell for under $800 and could run BASIC. He agreed to set up a meeting so I could talk Miles.

(p. 176) I remember going into the big conference room to meet Pete, his boss, Ed Heinsen, and Ed's boss, Miles. I made my presentation and showed them my design.

"Okay," Miles said after thinking about it for a couple of minutes. "There's a problem you'll have when you say you have output to a TV. What happens if it doesn't look right on every TV? I mean, is it an RCA TV a Sears TV or an HP product that's at fault?"

HP keeps a close eye on quality control, he told me. If HP couldn't control what TV the customer was using, how could it make sure the customer had a good experience? More to the point, the division didn't have the people or money to do a project like mine. So he turned it down.

I was disappointed, but I left it at that. Now I was free to enter into the Apple partnership with Steve and Ron. I kept my job, but after that I was officially moonlighting. Everybody I worked with knew about the computer board we were going to sell.

Over the next few months, Miles would keep coming up to me. He knew about BASIC-programmable computers because of his division out in Colorado, and even though they didn't want my design, he said he was intrigued by the idea of having a machine so cheap that anyone could own one and program it. He kept telling me he'd been losing sleep ever since he heard the idea.

But looking back, I see he was right. How could HP do it? It couldn't. This was nowhere near a complete and finished scientific engineer's product. Everybody saw that smaller, cheaper computers were going to be a coming thing, but HP couldn't justify it as a product. Not yet. Even if they had agreed, I see now that HP would've done it wrong anyway. I mean, when they finally did it in 1979, they did it wrong. That machine went nowhere.



Source:

Wozniak, Steve, and Gina Smith. iWoz: Computer Geek to Cult Icon: How I Invented the Personal Computer, Co-Founded Apple, and Had Fun Doing It. New York: W. W. Norton & Co., 2006.


The main Christensen book is:

Christensen, Clayton M., and Michael E. Raynor. The Innovator's Solution: Creating and Sustaining Successful Growth. Boston, MA: Harvard Business School Press, 2003.





July 9, 2010

Smarter Info Technology Frees Workers from Routine and Creates Jobs



(p. A22) Smarter computing technology, experts say, ought to make the most skilled workers -- in science, the arts and business -- even more productive and prosperous by freeing them from routine tasks. Their prosperity translates to spending that creates jobs in stores, schools, gyms, construction and elsewhere.

Artificial intelligence, experts say, should also generate new jobs even as it displaces others. The smart machines of the future will need programming, servicing and upgrading -- work done, perhaps, by a new class of digital technicians. The intelligent machines, experts add, will be specialists in a field, like the medical assistant project at Microsoft. They must be tailored with specialized software, perhaps igniting a new industry for artificial intelligence applications.

Of course, no one really knows just what artificial intelligence will mean for jobs and the economy, but the technology is marching ahead. "Its potential is far greater than simply substituting technology for human labor," said Erik Brynjolfsson, an economist at the M.I.T Sloan School of Management.




For the full story, see:

STEVE LOHR. "Jobs Created and Displaced." The New York Times (Fri., June 25, 2010): A22.

(Note: the date of the online version of the article was June 24, 2010.)





July 8, 2010

Low End Tech Upstart Moves Up-Market to Compete with Incumbents



MediaTekRevenueGraph2010-05-20.gif













Source of graph: online version of the WSJ article quoted and cited below.



The MediaTek example briefly mentioned below, seems a promising fit with Christensen's theory of disruptive innovators.


(p. B7) TAIPEI--A little-known Taiwanese chip-design company is making waves in the cellphone business, grabbing market share from larger U.S. rivals and helping drive down phone prices for consumers.


. . .


While MediaTek isn't known for cutting-edge innovation, it has been able to apply the nimble, cost-cutting approach of Taiwan's contract manufacturers to the business of designing semiconductors, in which engineers use advanced software to lay out the microscopic circuits that make gadgets like cellphones function.

"MediaTek has brought down the cost significantly," says Jessica Chang, an analyst at Credit Suisse Group AG, who says mobile-phone makers are increasingly drawn to MediaTek's products because of their functionality and low cost.



For the full story, see

TING-I TSAI. "Taiwan Chip Firm Shakes Up Cellphone Business." The Wall Street Journal (Mon., APRIL 19, 2010): B7.

(Note: ellipsis added.)


On Christensen's theories, see:

Christensen, Clayton M., and Michael E. Raynor. The Innovator's Solution: Creating and Sustaining Successful Growth. Boston, MA: Harvard Business School Press, 2003.





July 6, 2010

Porter Airlines Beats Incumbents in Serving High End Customers



DeluceRobertOfPorterAirlines2010-05-20.jpg"Robert Deluce set up Porter Airlines at Billy Bishop Toronto City Airport in October 2006." Source of caption and photo: online version of the WSJ article quoted and cited below.


Clayton Christensen explains why upstart entrepreneurs who move up-market to serve under-served customers, will almost always lose to motivated incumbents.

Apparently Robert Deluce has not read Christensen.


(p. B8) TORONTO--As a teenager, Robert Deluce learned to fly at this city's small airport just outside the downtown on a Lake Ontario island.

Lately, the 59-year-old airline entrepreneur has been giving his own brand of flying lessons there in a dogfight with larger competitors over a lucrative flying niche: the high-margin business traveler.

n 2005, Mr. Deluce bought the airport's ramshackle terminal and later kicked out an Air Canada regional partner named Jazz Air. Then, he set up Porter Airlines, which has become a hit with business fliers for its top-notch service and convenient location, a one-minute ferry ride from the downtown waterfront. Earlier this month, closely held Porter opened the first phase of a gleaming, 150,000-square-foot terminal that eventually will house two passenger lounges and 10 aircraft gates.


. . .


The new carrier's mascot is a raccoon. "He's mischievous and determined and pretty much always achieves his desired goal," said Mr. Deluce, chuckling over breakfast at a Toronto hotel. "Air Canada and Jazz probably think he's over-mischievous."


. . .


In recent years, Toronto's waterfront has been revitalized, with high-rise condos and parks replacing grain elevators and industrial warehouses. Air Canada's partner Jazz and a predecessor, which had been flying to and from the downtown airport for years, reduced service even as the redevelopment was progressing. The airport's traffic waned to 25,000 fliers in 2005 from 400,000 a year in the late 1980s.

Smelling opportunity, Mr. Deluce pounced, acquiring the old terminal and evicting Jazz. He raised C$126 million in start-up capital and placed a US$500 million order for 20 Canadian-built turboprop aircraft. With 70 seats, they are perfectly sized for the airport's short, 4,000-foot runway. Porter took wing in October 2006.

His aggressive tactics as CEO have earned him both criticism and grudging respect. Brian Iler, chairman of CommunityAir, a Toronto citizens advocacy group that wants the airport shut because of noise issues and other concerns, gives Mr. Deluce his due. "Everything he has done, he's managed to turn things his way," Mr. Iler says. "It's an amazing run of luck."


. . .


Porter now flies to four U.S. destinations and seven other cities in Eastern Canada, with an eighth coming this month. It had its first month of profitability in June 2007 and paid out to its employee profit-sharing plan that year and in 2008, Mr. Deluce says. He won't say whether Porter was profitable in 2009.

The new airline has attracted a following for its downtown location, competitive fares, leather seats with generous legroom and complimentary beer, wine and snacks. Female flight attendants wear retro pillbox hats and peplum jackets.

Christopher Sears, vice president of research for Montreal-based brokerage firm MacDougall, MacDougall & MacTier Inc., said he has flown Porter 30 to 40 times between Montreal and Toronto. Once he arrives in Toronto, he grabs a free shuttle to a hotel two blocks from his firm's Toronto office.

"Porter has built up a lot of goodwill with me," he says, vowing to stick with the company even if rivals break into the downtown airport.




For the full story, see

SUSAN CAREY. "Tiny Airline Flies Circles Around Its Rivals; Top-Notch Service, Proximity to Downtown Toronto Make Porter a Hit With High-Margin Business Travelers." The Wall Street Journal (Weds., MARCH 17, 2010): B8.

(Note: ellipses added.)

(Note: the online version of the article has the slightly different title "Tiny Airline Flies Circles Around Rivals; Top-Notch Service, Proximity to Downtown Toronto Makes Porter a Hit With High-Margin Business Travelers.")


On Christensen's theories, see:

Christensen, Clayton M., and Michael E. Raynor. The Innovator's Solution: Creating and Sustaining Successful Growth. Boston, MA: Harvard Business School Press, 2003.


BillyBishopAirportTrafficGraph2010-05-20.gif














Source of graph: online version of the WSJ article quoted and cited above.





July 3, 2010

Wozniak Spent a Lot of Time Collecting Information Before Building a Project



(p. 160) My style with projects has always been to spend a lot of time getting ready to build it. Now that I saw my own computer could be a reality, I started collecting information on all the components and chips that might apply to a computer design.

I would drive to work in the morning--sometimes as early as 6:30 a.m.--and there, alone in the early morning, I would quickly read over engineering magazines and chip manuals. I'd study the specifications and timing diagrams of the chips I was interested in, like the $40 Motorola 6800 Myron had told me about. All the while, I'd be preparing the design in my head.



Source:

Wozniak, Steve, and Gina Smith. iWoz: Computer Geek to Cult Icon: How I Invented the Personal Computer, Co-Founded Apple, and Had Fun Doing It. New York: W. W. Norton & Co., 2006.





June 27, 2010

Government Financing Is Not Best Method to Finance Creativity



(p. B4) Government financing is not the best method to prod companies to be creative, said Edmund S. Phelps Jr., a professor of economics at Columbia University who won the Nobel Prize in 2006. But he said it could work.

He spoke at the forum about dwindling innovation in the United States economy. China, India and Brazil are catching up with innovative output, he said, but not Russia.

A high-technology start-up, he said, inherently runs more risk if it can present its product to only one potential buyer -- the government -- rather than to a range of customers, some of whom may want the product, he said.

"If Russian politicians see that their own prosperity, and that of their people, lies in a more arms-length relationship between the government and business, that would open a lot of possibilities," he said.



For the full story, see:

ANDREW E. KRAMER. "Russia Plans to Promote Technology Innovations." The Wall Street Journal (Mon., February 4, 2010): B4.





June 25, 2010

Wozniak on the Motives and Rewards of Inventor and Innovator



(p. 147) The whole thing used forty-five chips, and Steve paid me half the seven hundred bucks he said they paid him for it. (They were paying us based on how few chips I could do it. in.) Later I found out he got paid a bit (p. 148) more for it--like a few thousand dollars--than he said at the time, but we were kids, you know. He got paid one amount, and told me he got paid another. He wasn't honest with me, and I was hurt. But I didn't make a big deal about it or anything.

Ethics always mattered to me, and I still don't really understand why he would've gotten paid one thing and told me he'd gotten paid another. But, you know, people are different. And in no way do I regret the experience at Atari with Steve Jobs. He was my best friend and I still feel extremely linked with him. I wish him well. And it was a great project that was so fun. Anyway, in the long run of money--Steve and I ended up getting very comfortable money-wise from our work founding Apple just a few years later--it certainly didn't add up to much.

Steve and I were the best of friends for a very, very long time. We had the same goals for a while. They jelled perfectly at forming Apple. But we were always different people, different people right from the start.

You know, it's strange, hut right around the time I started working on what later became the Apple I board, this idea popped into my mind about two guys who die on the same day. One guy is really successful, and he's spending all his time running companies, managing them, making sure they are profitable, and making sales goals all the time. And the other guy, all he does is lounge around, doesn't have much money, really likes to tell jokes and follow gadgets and technology and other things he finds interesting in the world, and he just spends his life laughing.

In my head, the guy who'd rather laugh than control things is going to be the one who has the happier life. That's just my opinion. I figure happiness is the most important thing in life, just how much you laugh. The guy whose head kind of floats, he's so happy. That's who I am, who I want to be and have always wanted to be.

(p. 149) And that's why I never let stuff like what happened with Breakout bother me. Though you can disagree--you can even split from a relationship--you don't have to hold it against the other. You're just different. That's the best way to live life and be happy

And I figured this all out even before Steve and I started Apple.



Source:

Wozniak, Steve, and Gina Smith. iWoz: Computer Geek to Cult Icon: How I Invented the Personal Computer, Co-Founded Apple, and Had Fun Doing It. New York: W. W. Norton & Co., 2006.





June 23, 2010

The 'First Mover Advantage' May Be a Disadvantage



During the dot.com era one of the rationalizations for dot.com firms to be losing money was that they had to be the 'first mover' that would grab the demand-side economies of scale arising from network effects.

For a variety of reasons, including the clarity of hindsight, the current consensus if that profitability is always worth worrying about, and being first is far from a guarantee of success.

On the other hand, if the authors quoted below are correct that everyone should be a "fast follower," then who will ever make the first move?

Maybe the problem lies in the metrics of success. Maybe the main measure of success lies in moving an important project forward, rather than being the one who ends up best positioned to monetize the advance?

So, for example, maybe those who built Netscape should be proud of what they did, even though Internet Explorer ended up dominating the market.

(I use "maybe" a lot above, not out of some rhetorical pose of modesty, but because these are issues that I am really grappling with.)


(p. R4) One of the fiercest rivalries in the information-technology world has long been over platforms--products that link users in networks, like iTunes for online music or Windows for computer operating systems. It's often a winner-take-all business; platform leaders can earn huge profits as they tend to dominate markets with few serious competitors.

A myth, however, has attached itself to the history of platforms: that each platform's originator has the best chance of dominating its market for years to come.

The truth is, that is rarely the case.

Instead of there being an advantage to being first, we found the opposite to be true. Most owners of leading IT platforms today did not create the markets they now rule. In almost all of the industries we studied, the current platform leaders introduced their products after a different company had already established the market with a platform of its own.

Out of the 15 platform industries that we studied, 14 of the current leaders began as followers in a market created by a competitor's platform. In only one market, for integrated business software, was the original platform creator still the leader--SAP AG. Five were fast followers, which we define as the second, third or fourth company to enter a market. The other nine were later followers.



For the full commentary, see:

GEZINUS J. HIDDING, JEFFREY R. WILLIAMS And JOHN J. SVIOKLA. "Technology; The IT Platform Principle: The First Shall Not Be First ." The Wall Street Journal (Mon., January 25, 2010): R4.





June 22, 2010

Obama Delays Biotech Innovation



SeedApprovalDelayGraph2010-05-20.jpg



















Source of graph: scanned from the print version of the WSJ article quoted and cited below.




(p. A8) The crop-biotechnology industry, growing frustrated as it watches the approval time for new seeds almost double under the Obama administration, is pressuring Washington to clear inventions more quickly.

The logjam at the U.S. Department of Agriculture, which must clear genetically modified seeds, is slowing the launch of products that could give farmers more alternatives to seeds from crop biotech giant Monsanto Co.

Also, some biotech-industry executives worry the delays signal that the Obama administration, which has painted itself as pro-biotech, is gearing up for a far tougher analysis of the potential environmental impact of these crops, which could make it harder for inventions to reach the marketplace.

On average, a genetically modified seed takes 1,188 days to pass federal scrutiny, almost twice as long as in 2008, the last year of the Bush administration, according to the Biotechnology Industry Organization, a Washington, D.C., trade group.

"There is concern we might see other countries move ahead of the U.S.," said Sharon Bomer Lauritsen, executive vice president of food and agriculture at BIO, who added that the delays "might stifle investment in what has been a very dynamic part of the U.S. economy." BIO's members include hundreds of companies such as DuPont Co., Syngenta AG and Monsanto, as well as academic institutions.




For the full story, see:

SCOTT KILMAN. "Biotech Firms Seek Speedier Reviews of Seeds; Approval Time for Genetically Modified Crops Doubles under Obama as Some Fear Tougher Stance; Feds Blame Logjam." The Wall Street Journal (Weds., April 28, 2010): A8.





June 21, 2010

Electronics Projects Were Wozniak's "Passion" and "Pastime" and "Reward"



(p. 127) I think most people with day jobs like to do something totally different when they get home. Some people like to come home and watch TV. But my thing was electronics projects. It was my passion and it was my pastime.

Working on projects was something I did on my own time to reward myself, even though I wasn't getting rewarded on the outside, with money or other visible signs of success.



Source:

Wozniak, Steve, and Gina Smith. iWoz: Computer Geek to Cult Icon: How I Invented the Personal Computer, Co-Founded Apple, and Had Fun Doing It. New York: W. W. Norton & Co., 2006.





June 14, 2010

Companies Make Big Bets to Get Us What We Need



MolycorpMineralsRareEarthMine2010-05-19.jpg"The Molycorp Minerals rare earth mine in Mountain Pass, Calif." Source of caption and photo: online version of the NYT article quoted and cited below.



If the government does not interfere with the price system, then the prospect of higher prices will provide private companies and entrepreneurs the incentive to take risks to provide us with what we need. In the article quoted below, the example is rare earth minerals that are used in high technology products.



(p. B1) On a high plateau where burros and jackrabbits wander an hour's drive southwest of Las Vegas, a 400-foot-deep chasm hewn from volcanic rock sits at the center of an international policy debate.

The chasm, in Mountain Pass, Calif., used to be the world's main mine for rare earth elements -- minerals crucial to military hardware and the latest wind turbines and hybrid gasoline-electric cars. Molycorp Minerals, which owns the mine, announced on Monday that it had registered with the Securities and Exchange Commission for an initial public offering to help raise the nearly $500 million needed to reopen and expand the mine.

Molycorp is making a big bet that its mine -- once the world leader in production of rare earth elements, but now a rusting relic -- can be made competitive again. Global demand is surging for the minerals. And customers, particularly the American military, are seeking alternatives to China, which now mines 97 percent of the world's rare earth elements.

As part of reopening the mine, Molycorp plans to increase its capacity to mine and refine neodymium for rare earth magnets, which are extremely lightweight and are used in many high-tech applications. It will also resume bulk production of lower-value rare earth elements like cerium, used in industrial processes like polishing glass and water filtration.



For the full story, see:

KEITH BRADSHER. "A Mine Owner's Risky Bet on Rare Minerals." The New York Times (Thur., April 22, 2010): B1 & B4.

(Note: italics in original; ellipses added.)

(Note: the online version of the review is dated April 21, 2010 and has the title "Challenging China in Rare Earth Mining.")





May 15, 2010

Cheap New Technology for the Masses Is Financed by First Adopters' High Priced Buys



iPadEarlyBuyerSayuriWatanabe2010-05-14.jpg "Buying on Day 1: Sayuri Watanabe came from Japan to be among the first to get an iPad last month at the Apple store in downtown San Francisco." Source of caption and photo: online version of the NYT article quoted and cited below.


(p. 6) WHY would anyone rush to buy a product knowing full well that it would be cheaper -- and probably better -- in a matter of months?

Hundreds of thousands of iPad buyers did just that last month. Steven P. Jobs, Apple's chief executive, crowed that in the first 28 days on the market, Apple sold one million iPads. He found it remarkable that buyers snatched up this new slate computer at twice the fervid pace of the first iPhone.

But what is truly remarkable about this surge in consumption is that early adopters -- those who simply have to own a new gadget right away -- cheerfully exhibited what might seem to be irrational behavior. These ardent consumers will stand in long lines, if that's what it takes, to get an overpriced gadget ahead of everyone else they know.

A tough lesson about buying early could have been learned by the iPhone's first buyers back in 2007. Those early adopters paid $600 for a phone. Two months later, Apple dropped the price to $400. Then, in June 2009, it introduced a better version, with twice the storage, for $200, one-third the original's price.


. . .


Dan Ariely, a professor of behavioral economics at Duke University and the author of a new book, "The Upside of Irrationality," has studied why earlier adopters do what they do. "It's not about the cost-benefit analysis," he says. And rarely is it a successful calculation of higher productivity, though many a person has tried to justify purchases of expensive toys that way.

It can be more about cementing one's identity. Although people who want to be first with a product aren't making a direct calculation -- "I'd pay $100 for my ego" -- they may derive value from showing off a new product or being perceived as being at technology's forefront.

"I realized years ago that I derive great pleasure from buying a new gadget," said Professor Ariely. "I bought a Segway."

And public awareness may matter. Professor Ariely says the behavior is akin to how we can be more willing to do something good if the public knows about it.


. . .


But even if you would never be the first in your neighborhood to buy a gadget, don't scorn the early adopters. They are working for you. "They, in a sense, provide valuable services to other consumers by their willingness to serve as a guinea pig," said Jay Pil Choi, a professor of economics at Michigan State University, who wrote a much-quoted paper on herd behavior and the "penguin effect."


. . .


HE described early adopters as pioneers. "If all consumers are striving for value and take the approach of 'wait and see,'" he said, "the new products will never be able to take off or take much longer to succeed in the marketplace."

He added, "Their early purchase allows the firms to go down the learning curve and enables a lower price for other consumers."



For the full commentary, see:

DAMON DARLIN. "Everybody's Business; Applause, Please, for Early Adopters." The New York Times, SundayBusiness Section (Sun., MAY 9, 2010): 6.

(Note: ellipses added.)

(Note: the online version of the article is dated May 7, 2010.)





April 9, 2010

Huge Greenhouses Dependably Yield a Variety of Ripe Tomatoes Even in Winter



TomatoGreenhouseWinterMaineInside2010-04-04.JPG"Some of the more than 500,000 plants at Backyard Farms at its Maine greenhouse." Source of caption and photo: online version of the NYT article quoted and cited below.


(p. D1) AN icy mixture of rain and sleet fell on the glass roof of Greenhouse Two at Backyard Farms here, but as its big blue door slid open and the warm, green, celery smell of tomato plants wafted out, it was summer.

When it was built three years ago, the company's first 24-acre greenhouse in Madison was already the largest building in Maine. This second connected greenhouse, completed last year, brought the total area under glass to some 42 acres, or roughly the size of 32 football fields. Even in the depths of winter, a million tomatoes ripen indoors to harvest each week, snipped from their vines by workers in T-shirts and shorts.


. . .


Once, if you wanted tomatoes out of season, you mainly had to settle for hard pink ones picked green in the fields of Florida or Mexico and shipped by truck. Commercial greenhouses could do better, but they were a niche market.

Backed by consumer demand for fresh tomatoes year round, the indoor acreage devoted to growing tomatoes has become nearly six times as large since the early 1990s, said Roberta Cook, a marketing economist who helped write what many in the industry consider to be the definitive report on greenhouse tomatoes in 2005.

Those tough pink ones are still good and cheap enough for most fast food restaurants and the food service industry, which buy about half the fresh tomatoes sold in the United States. But with shoppers willing to pay a pre-(p. D5)mium -- even $4 to $5 a pound -- for red vine-ripened ones with more flavor, greenhouse tomatoes now represent more than half of every dollar spent on fresh tomatoes in American supermarkets, according to figures from the Perishables Group, a market research firm in Chicago.


. . .


Advances in genetics have allowed breeders to cross-pollinate precisely for control over specific attributes like size, color, disease resistance, firmness for shipping and levels of acids and sugars, the balance of which accounts for the bulk of a tomato's flavor. Too little sugar turns fruit tart. Too little acid turns it bland. Too little of both leaves tomatoes with little flavor.

As tomatoes ripen on the vine they develop more of those sugars and acids and other flavor elements. But most of the major farms growing tomatoes that are sold fresh year round are in areas where the climate is more hospitable to varieties best picked green.

By creating their own climate -- whether in Arizona, Maine or Canada -- greenhouses allow growers to pick and ship tomatoes only when they're ripe.



For the full story, see:

CHRIS LADD. "Endless Summer, Even in Maine." The New York Times (Weds., March 31, 2010): D1 & D5.

(Note: ellipses added.)

(Note: the online version of the article is dated March 30, 2010, and has the title "Giant Greenhouses Mean Flavorful Tomatoes All Year.")



TomatoGreenhouseWinterMaine2010-04-04.JPG"Even as snow falls outside, workers harvest tomatoes year-round at Backyard Farms in Madison, Maine. About 200 of them tend a half-million plants under 42 acres of glass, roughly the same amount of floorspace as in the Chrysler Building." Source of caption and photo: online version of the NYT article quoted and cited above.





April 6, 2010

"Coase's Penguin" and the Motives for "Commons-Based Peer Production"



(p. 108) Noted Yale law professor Yochai Benkler has a theory. In a widely circulated and famous essay on the Internet called "Coase's Penguin," he offered his thinking on why people participate in efforts such as Linux and other "free" projects. There was already a culture, before Wikipedia, of folks donating their time, effort, and skills to the collective good for no monetary gain or immediate compensation. Benkler observed this part of the hacker ethos and was curious to know what the common thread was.

He dubbed it "commons-based peer production." It's a fancy moniker for the phenomenon of people working together toward the same end--creating computer code or content that is free to be copied, distributed, used, and modified by others.

Benkler believes the Internet and the "free culture" movement have allowed individuals to connect and combine their efforts in ways unprecedented in history. The legal academic is not shy to combine scholarship outside his area of training by drawing on economics, sociology, and technology to form his theory.

According to Benkler, if monetary rewards and the creation of corporate firms have been the accepted driving force for human innovation and progress, there has to be something else driving volunteers in Linux, Wikipedia, and other "free" projects that have become so pervasive and monumental in the digital age.

He asserts the motivation comes from two main things other than money: the "socio-psychological" reward of interacting with others, and the "hedonic" personal gratification of the task.

Wikipedia's magic occurs when these two things come together. One person's personal affection and indulgence---mapmaking, grammar checking, baseball statistics, history of stamps---easily finds a home in Wikipedia's amalgam of topics, where it also feeds into and inspires activities by others.



Source:

Lih, Andrew. The Wikipedia Revolution: How a Bunch of Nobodies Created the World's Greatest Encyclopedia. New York: Hyperion, 2009.





April 1, 2010

"Real Innovation in Technology Involves a Leap Ahead"



iPad2010-03-16.jpg"GAME CHANGER? After months of anticipation, Apple unveiled its iPad tablet computer last week." Source of caption and photo: online version of the NYT article quoted and cited below.


(p. 1) The more, the better. That's the fashionable recipe for nurturing new ideas these days. It emphasizes a kind of Internet-era egalitarianism that celebrates the "wisdom of the crowd" and "open innovation." Assemble all the contributions in the digital suggestion box, we're told in books and academic research, and the result will be collective intelligence.

Yet Apple, a creativity factory meticulously built by Steven P. Jobs since he returned to the company in 1997, suggests another innovation formula -- one more elitist and individual.

This approach is reflected in the company's latest potentially game-changing gadget, the iPad tablet, unveiled last week. It may succeed or stumble but it clearly carries the taste and perspective of Mr. Jobs and seems stamped by the company's earlier marketing motto: Think Different.


. . .


(p. 6) Great products, according to Mr. Jobs, are triumphs of "taste." And taste, he explains, is a byproduct of study, observation and being steeped in the culture of the past and present, of "trying to expose yourself to the best things humans have done and then bring those things into what you are doing."

His is not a product-design philosophy steered by committee or determined by market research. The Jobs formula, say colleagues, relies heavily on tenacity, patience, belief and instinct. He gets deeply involved in hardware and software design choices, which await his personal nod or veto. Mr. Jobs, of course, is one member of a large team at Apple, even if he is the leader. Indeed, he has often described his role as a team leader. In choosing key members of his team, he looks for the multiplier factor of excellence. Truly outstanding designers, engineers and managers, he says, are not just 10 percent, 20 percent or 30 percent better than merely very good ones, but 10 times better. Their contributions, he adds, are the raw material of "aha" products, which make users rethink their notions of, say, a music player or cellphone.

"Real innovation in technology involves a leap ahead, anticipating needs that no one really knew they had and then delivering capabilities that redefine product categories," said David B. Yoffie, a professor at the Harvard Business School. "That's what Steve Jobs has done."



For the full commentary, see:

STEVE LOHR. "The Apple in His Eye." The New York Times, Week in Review Section (Sun., MARCH 4, 2010): 1 & 6.

(Note: ellipsis added.)

(Note: the online version of the article is dated January 29, 2010 and had the title "Steve Jobs and the Economics of Elitism.")






March 27, 2010

An "Entrepreneur's Visa" to Let the Future Sergey Brin In



(p. A19) . . . , there is one way to create a lot more jobs without spending federal money. Let's import them. More precisely, let's import the people who create them: entrepreneurs.

A bipartisan bill that would begin to do just that was introduced on Feb. 24 by Sens. John Kerry (D., Mass.) and Richard Lugar (R., Ind.). Their "Startup Visa Act" would create a new, two-year visa for immigrant entrepreneurs whose firms attract at least $250,000 in financing from American angel investors or venture capital firms.


. . .


Here's a way to improve on the Kerry-Lugar plan. Create a true "job creator's visa," one tied directly and only to job creation by new immigrant entrepreneurs. The visa could be a temporary one for immigrants already here on another visa who establish a business. It could then be extended if the firm hires at least one American non-family resident. The visa should become permanent once the enterprise crosses a certain job threshold (such as five or 10 workers). But it would not be tied to financing.


. . .


Google was founded by Sergey Brin, a Russian immigrant, and American Larry Page by borrowing funds from their own credit cards. Why on earth would we want to create an entrepreneurs' visa that couldn't let in the future Sergey Brin?



For the full commentary, see:

ROBERT E. LITAN. "Visas for the Next Sergey Brin; To create more jobs, let's import more employers." The Wall Street Journal (Mon., MARCH 8, 2010): A19.

(Note: ellipses added.)

(Note: the online version of the article is dated MARCH 7, 2010.)





March 25, 2010

At Odds with Academic Culture, Wiki Programmer Adams Released Early and Released Often



(p. 67) Adams did something unexpected for the academic community, but common in open source culture--release early and release often. Within weeks of its launch, one of the biggest annoyances of Wikipedia was resolved directly by the software's author. It was not because of monetary compensation or any formal request, but simply because the author was interested in solving it on his own time, and sharing it with others. It was the hacker ethos, and it had crossed from the domain of tech programmers into the world of encyclopedias.


Source:

Lih, Andrew. The Wikipedia Revolution: How a Bunch of Nobodies Created the World's Greatest Encyclopedia. New York: Hyperion, 2009.





March 24, 2010

The Ultimate Complement: When Your Competitor Uses Your Product



BallmerSteveIphone2010-03-16.jpg










". . . apparently a photo that was snapped from the iPhone as Ballmer brandished it above his head." Source of caption and photo: http://www.gearfuse.com/ballmer-lashes-out-at-microsoft-employed-iphone-user-threatens-to-smash-iphone/



(p. A1) REDMOND, Wash.--Microsoft Corp. employees are passionate users of the latest tech toys. But there is one gadget love that many at the company dare not name: the iPhone.

The iPhone is made, of course, by Microsoft's longtime rival, Apple Inc. The device's success is a nagging reminder for Microsoft executives of how the company's own efforts to compete in the mobile business have fallen short in recent years. What is especially painful is that many of Microsoft's own employees are nuts for the device.

The perils of being an iPhone user at Microsoft were on display last September. At an all- company meeting in a Seattle sports stadium, one hapless employee used his iPhone to snap photos of Microsoft Chief Executive Steve Ballmer. Mr. Ballmer snatched the iPhone out of the employee's hands, placed it on the ground and pretended to stomp on it in front of thousands of Microsoft workers, according to people present.


. . .


Nearly 10,000 iPhone users were accessing the Microsoft employee email system last year, say two people who heard the estimates from senior Microsoft executives. That figure equals about 10% of the company's glo-(p. A10)bal work force.

Employees at Apple, in contrast, appear to be more devoted to the company's own mobile phone. Several people who work at the company or deal regularly with employees there say they can't recall seeing Apple workers with mobile phones other than the iPhone in recent memory.



For the full story, see:

NICK WINGFIELD. "Forbidden Fruit: Microsoft Workers Hide Their iPhones; Steve Ballmer Sours on Apple Product; Work for Ford, Drive a Ford." The Wall Street Journal (Sat., MARCH 13, 2010): A1 & A10.

(Note: ellipses added.)

(Note: the online version of the article had the date MARCH 12, 2010.)





March 20, 2010

Brin Plays Google's "Ethical Trump Card"



BrinSergey2010-03-16.jpg "Co-founder Sergey Brin has been active in Google's dealings with China." Source of caption and photo: online version of the WSJ article quoted and cited below.


(p. A8) As a boy growing up in the Soviet Union, Sergey Brin witnessed the consequences of censorship. Now the Google Inc. co-founder is drawing on that experience in shaping the company's showdown with the Chinese government.

Mr. Brin has long been Google's moral compass on China-related issues, say people familiar with the matter. He expressed the greatest concern among decision makers, they say, about the compromises Google made when it launched its Chinese-language search engine, Google.cn, in 2006. He is now the guiding force behind Google's decision to stop filtering search results in China, say people familiar with the decision.


. . .


The move is the clearest manifestation yet of a tension that has always existed at Google.

The Internet company, on one hand, is analytical: It built its core search business on algorithms that determine the relevance of Web sites and has tried to apply quantitative analysis to traditionally subjective parts of a business, such as hiring decisions. On the other hand, Mr. Brin and co-founder Larry Page have passionately touted Google's ability to spread democracy through access to information, and adopted the unofficial and now-famous motto, "Don't Be Evil."

"At its best, Google is data-driven with an ethical trump card," said Larry Brilliant, who headed up the company's philanthropic efforts until 2009. Always it was the founders, Messrs. Brin and Page, who could play that card, he added.



For the full story, see:

BEN WORTHEN. "Soviet-Born Brin Has Shaped Google's Stand." The Wall Street Journal (Sat., MARCH 13, 2010): A8.

(Note: ellipsis added.)

(Note: the online version of the article had the date MARCH 12, 2010 and has the slightly longer title "Soviet-Born Brin Has Shaped Google's Stand on China.")





March 16, 2010

Myhrvold Innovates in Financing Innovation



MyhrvoldNathanIntellectualVentures2010-03-01.jpg "Nathan Myhrvold, chief of Intellectual Ventures, says patent holders are being treated unfairly." Source of caption and photo: online version of the NYT article quoted and cited below.


When Nathan Myhrvold was at Microsoft, he helped Bill Gates write The Road Ahead, a well-written book full of realistically optimistic speculation, forecast and analysis.

Besides his main initiative, discussed below, he has recently been in the news due to his bold and controversial suggestion for how to cheaply solve global warming.


(p. B1) BELLEVUE, Wash. -- Nathan Myhrvold wants to shake up the marketplace for ideas. His mission and the activities of the company he heads, Intellectual Ventures, a secretive $5 billion investment firm that has scooped up 30,000 patents, inspire admiration and angst.

Admirers of Mr. Myhrvold, the scientist who led Microsoft's technology development in the 1990s, see an innovator seeking to elevate the economic role and financial rewards for inventors whose patented ideas are often used without compensation by big technology companies. His detractors see a cynical operator deploying his bulging patent trove as a powerful bargaining chip, along with the implied threat of costly litigation, to prod high-tech companies to pay him lucrative fees. They call his company "Intellectual Vultures."

White hat or black hat, Intellectual Ventures is growing rapidly and becoming a major force in the marketplace for intellectual capital. Its rise comes as Congress is considering legislation, championed by large technology companies, that would make it more difficult for patent holders to win large damage awards in court -- changes that Mr. Myhrvold has opposed in Congressional testimony and that his company has lobbied against.


. . .


(p. B10) The issues surrounding Intellectual Ventures, viewed broadly, are the ground rules and incentives for innovation. "How this plays out will be crucial to the American economy," said Josh Lerner, an economist and patent expert at the Harvard Business School.

Mr. Myhrvold certainly thinks so. He says he is trying to build a robust, efficient market for "invention capital," much as private equity and venture capital developed in recent decades. "They started from nothing, were deeply misunderstood and were trashed by people threatened by new business models," he said in his offices here.

Mr. Myhrvold presents his case at length in a 7,000-word article published on Thursday in the Harvard Business Review. "If we and firms like us succeed," he writes, "the invention capital system will turbocharge technological progress, create many more new businesses, and change the world for the better."

In the article and in conversation, Mr. Myhrvold describes the patent world as a vastly underdeveloped market, starved for private capital and too dependent on federal financing for universities and government agencies, which is mainly aimed at scientific discovery anyway. Eventually, he foresees patents being valued as a separate asset class, like real estate or securities.

His antagonists, he says, are the "cozy oligarchy" of big technology companies like I.B.M., Hewlett-Packard and others that typically reach cross-licensing agreements with each other, and then refuse to deal with or acknowledge the work of inventors or smaller companies.


. . .


Mr. Myhrvold personifies the term polymath. He is a prolific patent producer himself, with more than 100 held or applied for. He earned his Ph.D. in physics from Princeton and did postdoctorate research on quantum field theory under Stephen Hawking, before founding a start-up that Microsoft acquired.

He is an accomplished French chef, who has also won a national barbecue contest in Tennessee. He is an avid wildlife photographer, and he has dabbled in paleontology, working on research projects digging for dinosaur remains in the Rockies.





For the full story, see:

STEVE LOHR. "Turning Patents Into 'Invention Capital'." The New York Times (Thur., February 18, 2010): B1 & B10.

(Note: ellipses added.)

(Note: the online version of the article is dated February 17, 2010.)


The Bill Gates book is:

Gates, Bill. The Road Ahead. New York: Viking Penguin, 1995.


Myhrvold's Harvard Business Review essay is:

Myhrvold, Nathan. "The Big Idea: Funding Eureka!" Harvard Business Review 88, no. 2 (March 2010): 40-50.



MyhrvoldNathanFreezeDryMachine2010-03-01.jpg "Nathan Myhrvold with a machine that freeze-dries food. Intellectual Ventures so far has paid $315 million to individual inventors." Source of caption and photo: online version of the NYT article quoted and cited above.





March 12, 2010

The Entrepreneurial Epistemology of Wikipedia



Wikipedia-RrevolutionBK2010-02-08.jpg















Source of book image: http://kellylowenstein.files.wordpress.com/2009/04/wikipedia-revolution1.jpg



Wikipedia is a very unexpected and disruptive institution. Amateurs have produced an encyclopedia that is bigger, deeper, more up-to-date, and arguably of at least equal accuracy, with the best professional encyclopedias, such as Britannica.

I learned a lot from Lih's book. For instance I did not know that the founders of Wikipedia were admirers of Ayn Rand. And I did not know that the Oxford English Dictionary was constructed mainly by volunteer amateurs.

I also did not know anything about the information technology precursors and the back-history of the institutions that helped Wikipedia to work.

I learned much about the background, values, and choices of Wikipedia entrepreneur "Jimbo" Wales. (Jimbo Wales seems not to be perfect, but on balance to be one of the 'good guys' in the world---one of those entrepreneurs who can be admired for something beyond their particular entrepreneurial innovation.)

Lih's book also does a good job of sketching the problems and tensions within Wikipedia.

I believe that Wikipedia is a key step in the development of faster and better institutions of knowledge generation and communication. I also believe that substantial further improvements can and will be made.

Most importantly, I think that you can only go so far with volunteers--ways must be found to reward and compensate.

In the meantime, much can be learned from Lih. In the next few weeks, I will be quoting a few passages that I found especially illuminating.


Book discussed:

Lih, Andrew. The Wikipedia Revolution: How a Bunch of Nobodies Created the World's Greatest Encyclopedia. New York: Hyperion, 2009.





March 6, 2010

"Silicon Valley's Economy is Sputtering"



SiliconValleyEmptyOfficeBuilding2010-02-28.jpg "An unoccupied office building in San Jose, Calif., in December. Many tech firms are hiring engineers abroad to do their work." Source of caption and photo: online version of the NYT article quoted and cited below.


(p. B3) SAN FRANCISCO -- Silicon Valley's economy is sputtering and risks permanently stalling, according to an annual report by a group of researchers in the region.

Part of the toll on Silicon Valley has resulted from the recession. The region, the center of the global technology industry, lost 90,000 jobs from the second quarter of 2008 to the second quarter of 2009. Unemployment is higher than national levels and the worst in the region since 2005, when technology companies were still recovering from the dot-com implosion.

The drop in the number of midlevel jobs -- the engineers who drive much of the Valley's growth -- has been sharpest. And when companies do hire, they are cautiously hiring independent contractors instead of regular employees, and are hiring abroad, according to the "2010 Index of Silicon Valley" report, which was produced by the Joint Venture: Silicon Valley Network and the Silicon Valley Community Foundation, two local nonprofit groups.

Other economic indicators are also gloomy, the report found.

"We show no evidence that the recovery has arrived," said Russell Hancock, chief executive of Joint Venture.




For the full story, see:

CLAIRE CAIN MILLER. "Report Warns Silicon Valley Could Lose Its Edge." The New York Times (Thurs., February 11, 2010): B3.

Note: The online version of the article is dated February 10, 2010, and has the title "Report Warns Silicon Valley Could Lose Its Edge.")





February 24, 2010

Business Decisions Often Need to Be Made Before You Have Much Data



McGrathRitaGunther2010-01-27.jpgRita Gunther McGrath is a member of the faculty of the Columbia Business School. Source of photo: online version of the WSJ article quoted and cited below.


(p. R2) BUSINESS INSIGHT: You and Prof. Ian C. MacMillan of the Wharton School of the University of Pennsylvania wrote a book called "Discovery-Driven Growth." What is discovery-driven growth?

DR. MCGRATH: Discovery-driven growth is a way of planning to grow that doesn't require a lot of analytical information at the outset. It recognizes that many of the data that you need to make decisions don't exist at the time that you have to make the decisions. It's a plan to learn.

I think we all live with a conceptual overhang from an industrial era when things were more predictable. You had big production runs. At least if you were an American company, you had a lot of markets with very little competition, and what competition there was was more or less predictable. In many businesses you could use the past as an adequate guide to what the future held for you.

In more and more industries, those conditions no longer apply. You're seeing temporary advantages, very rapid swings in who's on top competitively, new technologies that make older ones irrelevant at an ever-faster clip--the usual litany of things people moan about today. But I think one of the things that has not yet quite been fully recognized is that these have an impact on our management processes--or should.



For the full interview, see:

Martha E. Mangelsdorf. "Executive Briefing; Learning From Corporate Flops; When starting new ventures, companies should revisit their assumptions early and often." The Wall Street Jounal (Mon., OCTOBER 26, 2009): R2.

(Note: italics in original.)


DiscoveryDrivenGrowthBK.gif















Source of book image: http://events.roundtable.com/iguru/DiscoveryDrivenGrowth.gif.






February 20, 2010

"How Am I Going to Live without Google?"



GoogleChinaFlowers2010-01-25.jpg "A woman examined bouquets and messages left by Google users on Wednesday outside the Internet search company's headquarters in Beijing." Source of caption and photo: online version of the NYT article cited way below (after the citation to the quoted article, which is a different article).


David Smick in The World as Curved, has suggested that restrictions on the internet in China, limit entrepreneurship, and ultimately economic growth.


(p. 5) BEIJING -- At the elite Tsinghua University here, some students were joking Friday that they had better download all the Internet information they wanted now in case Google left the country.

But to many of the young, well-educated Chinese who are Google's loyal users here, the company's threat to leave is in fact no laughing matter. Interviews in Beijing's downtown and university district indicated that many viewed the possible loss of Google's maps, translation service, sketching software, access to scholarly papers and search function with real distress.

"How am I going to live without Google?" asked Wang Yuanyuan, a 29-year-old businessman, as he left a convenience store in Beijing's business district.


. . .


Li An, a Tsinghua University senior, said she used to download episodes of "Desperate Housewives" and "Grey's Anatomy" from sites run by BT China that are now closed. "I love American television series," she said with frustration during a pause from studying Japanese at a university fast-food restaurant on Friday.

The loss of Google would hit her much harder, she said, because she relies on Google Scholar to download academic papers for her classes in polymer science. "For me, this is terrible," Ms. Li said.

Some students contend that even after Google pulls out, Internet space will continue to shrink. Until now, Google has shielded Baidu by manning the front line in the censorship battle, said a 20-year-old computer science major at Tsinghua.

"Without Google, Baidu will be very easy to manipulate," he said. "I don't want to see this trend."

A 21-year old civil engineering student predicted a strong reaction against the government. "If Google really leaves, people will feel the government has gone too far," he insisted over lunch in the university cafe.

But asked whether that reaction would influence the government to soften its policies, he concentrated on his French fries. "I really don't know," he said.




For the full story, see:

SHARON LaFRANIERE. "Google Users in China, Mostly Young and Educated, Fear Losing Important Tool." The New York Times, First Section (Sun., January 17, 2010): 5.

(Note: the online version of the article has the title "China at Odds With Future in Internet Fight" and is dated January 16, 2010.)

(Note: ellipsis added.)


The source of the photo at the top is the online version of:

KEITH BRADSHER and DAVID BARBOZA. "Google Is Not Alone in Discontent, But Its Threat Stands Out." The New York Times (Thurs., January 13, 2010): B1 & B4.

(Note: the online version of the article has the slightly different title "Google Is Not Alone in Discontent, But Its Threat to Leave Stands Out" and is dated January 14, 2010.)


The reference to the Smick book is:

Smick, David M. The World Is Curved: Hidden Dangers to the Global Economy. New York: Portfolio Hardcover, 2008.





February 9, 2010

Venture Capitalists Invested 37% Less in Start-Ups in 2009



(p. B5) Venture capitalists, whose money provides fuel to technology start-ups, last year invested the lowest amount in such companies since 1997, according to a report from PricewaterhouseCoopers and the National Venture Capital Association released on Friday.


. . .


In 2009, venture capitalists invested $17.7 billion in 2,795 start-ups -- 37 percent less cash and 30 percent fewer deals than in 2008. Internet companies, which have excited investors for more than a decade, took a big hit as investment declined 39 percent.




For the full story, see:

CLAIRE CAIN MILLER. "Venture Capital Was Tight for Tech Start-Ups in '09." The New York Times (Fri., January 22, 2010): B5.

(Note: ellipsis added.)





February 8, 2010

In Creative Destruction, Firms Survive that Have Technological Expertise Useful for New Product



StudebakerCarriage2010-01-23.jpg"Collection of Studebaker National Museum, South Bend, Ind." "Those who disparage buggies as a dead end forget Studebaker switched from carriages to cars." Source of caption and photo: online version of the NYT article quoted and cited below.


(p. 4) I spoke recently about buggy whips with Thomas A. Kinney, an assistant professor of history at Bluefield College in Virginia and author of "The Carriage Trade: Making Horse-Drawn Vehicles in America."

There were 13,000 businesses in the wagon and carriage industry in 1890, Mr. Kinney said. A company survived not by conceiving of itself as being in the "personal transportation" business, but by commanding technological expertise relevant to the automobile, he said. "The people who made the most successful transition were not the carriage makers, but the carriage parts makers," he said, some of whom are still in business.

One is the giant Timken Company, whose signature products, roller bearings, were first used in wagon wheels in the 1890s. They easily adapted to the automobile because they could be applied "to nearly anything that moved," Mr. Kinney wrote.

Westfield, Mass., still known as "Whip City," once had more than 40 businesses that made whips, tools and carriage parts. Today, only Westfield Whip Manufacturing, founded in 1884, remains. Although it produces buggy whips -- now called carriage whips -- most of its whips and crops, called "bats," are for equestrian activities like dressage and jumping.

Buggy whips, with their long, rigid handles and flexible end lashes, were created by braiding fiber around a hard core and had no automotive analog.

The carriage makers did, and they tried their best to remake themselves into automakers. But they were expert woodworkers without expertise in precision metalworking, Mr. Kinney said: "Bicycle manufacturers were actually better suited for auto manufacturing than were carriage makers."

Businesses do die, even big ones. Leslie Hannah, a visiting professor of economic history at the London School of Economics, studied the 100 largest industrial companies in the world between 1912 and 1995. Almost half of them disappeared, "and more than a quarter experienced bankruptcy or a similar close shave with it," he wrote in "Learning by Doing in Markets, Firms and Countries."

The standout carriage business that succeeded was the Studebaker Brothers Manufacturing Company, which began as a blacksmith shop in 1852 and had the financial resources to acquire smaller companies that supplied it with the precision metalworking expertise it lacked when it decided to enter the auto business. In 1913, its automobile production was second only to that of Ford Motor.




For the full story, see:

RANDALL STROSS. "Digital Domain; Failing Like a Buggy Whip Maker? Better Check Your Simile." The New York Times, SundayBusiness Section (Sun., January 10, 2010): 4.

(Note: the online version of the article is dated January 9, 2010.)

(Note: bold added.)





February 7, 2010

Entrepreneur Kurzweil Brought Sunshine to Stevie Wonder's Life



(p. 265) On the snowy morning of January 13, 1976, . . . , there was unusual traffic on Rogers Street. Outside the gray one-story buildings with their clouded tilt-out windows, vans from various television channels maneuvered to park. A man from the National Federation of the Blind struggled over a snow bank onto the sidewalk and began tapping earnestly to get his bearings. A dark-haired young man set out on a three-block trek to the nearest vendor of coffee and donuts for the gathering media. In the room at number 68, two engineers poked at a gray box that looked like a mimeograph machine sprouting wires to a Digital Equipment Corporation computer. Several intense young men in their early twenties debated when to begin a demonstration of the device. The short, curly-haired leader of the group, twenty-seven-year-old Raymond Kurzweil, refused to start until the arrival of a reporter from The New York Times.

The event was a press conference announcing the first breakthrough product in the field of artificial intelligence: a reader for the blind. Described as an "omnifont character recognition device" linked to a synthetic voice, the machine could read nearly any kind of book or document laid face down on its glass lens. With a learning faculty that improved the device's performance as it proceeded through blurred, faded, or otherwise illegible print, the machine solved problems of pattern recognition and synthesis that had long confounded IBM, Xerox, and the Japanese conglomerates, as well as thousands of university researchers.

. . .


(p. 266) Stevie Wonder, the great blind musician, called. He had heard about the device after its appearance on the "Today Show" and it seemed a lifelong dream come true. He headed up to Cambridge to meet with Kurzweil.

. . .


As Kurzweil remembers, "He was very excited about it and wanted (p. 267) one right away, so we actually turned the factory upside down and produced a unit that day. We showed him how to hook it up himself. He left with it practically under his arm. I understand he took it straight to his hotel room, set it up. and read all night." As Wonder said, the technology has been "a brother and a friend . . . . without question, another sunshine of my life." Wonder stayed in touch with Kurzweil over the years and would play a key role in conceiving and launching a second major Kurzweil product.





Source:

Gilder, George. Microcosm: The Quantum Revolution in Economics and Technology. Paperback ed. New York: Touchstone, 1990.

(Note: italics in original; all ellipses added except the ellipsis internal to the last paragraph, which was in the original.)






January 9, 2010

Bose Leapfrogs the Competition in Defense of Your Peace and Quiet



BoseQuietComfort15.jpg"The Bose QuietComfort 15 has refined circuitry and redesigned earcaps." Source of caption: print version of the NYT article quoted and cited below. Source of photo: online version of the NYT article quoted and cited below.



(p. B8) . . . , if your sales are getting eaten alive by cheaper rivals, and you don't want to play the price game, you have only one option: play leapfrog. Make your gadget so much better than the me-toos that people will be willing to pay your premium once again.

That's the idea behind Bose's new QuietComfort 15 model ($300), which replaces the QuietComfort 2.


. . .


First, the QC15 model really, truly does advance the art of noise cancellation -- big time. The QC 2 headphones and my Panasonics cut the airplane roar by half. But the 15 reduced it by, say, 85 percent, leaving only a distant, whispery whoosh to remind you that you're in an aluminum tube 39,000 feet up in the air. Taking them off after a while, as you'll want to do because your ears get sweaty, is like walking into a rock concert when you've been outside the building.




For the full story, see:

DAVID POGUE. "State of the Art; Ho Ho Ho? You Won't Hear a Thing." The New York Times (Thurs., December 3, 2009): B1 & B8.

(Note: the online version of the article is "State of the Art; Bose's Latest Headphones Can Quell the Clangor" and is dated December 2, 2009.)

(Note: ellipses added.)





December 29, 2009

Intel's Computer-on-a-Chip "Was Achieved Largely by Immigrants from Hungary, Italy, Israel, and Japan"



(p. 111) By launching the computer-on-a-chip, Intel gave America an enduring advantage in this key product in information technology--an edge no less significant because it was achieved largely by immigrants from Hungary, Italy, Israel, and Japan. Intel's three innovations of 1971--plus the silicon gate process that made them the smallest, fastest, and best-selling devices in the industry--nearly twenty years later remain in newer versions the most powerful force in electronics.




Source:

Gilder, George. Microcosm: The Quantum Revolution in Economics and Technology. Paperback ed. New York: Touchstone, 1990.





December 21, 2009

Did Fairchild Fail Due to Bad Management or Disruptive Technology?



Clayton Christensen has shown how good management, following respected practices, can fail in the face of disruptive technologies. It would be interesting to investigate whether Fairchild was an example of what Christensen is talking about, or whether it just did not have good management.


(p. 89) Andrew Grove . . . had played a central role in bringing Fairchild to the threshold of a new era. But Fairchild would not enjoy the fruits of his work. Following the path of venture capital pioneer Peter Sprague were scores of other venture capitalists seeking to exploit the new opportunities he had shown them. Collectively, they accelerated the pace of entrepreneurial change--splits and spinoffs, startups and staff shifts--to a level that might be termed California Business Time ("What do you mean, I left Motorola quickly?" asked Gordon Campbell with sincere indignation. "I was there eight months!").

The venture capitalist focused on Fairchild: that extraordinary pool of electronic talent assembled by Noyce and Moore, but left essentially unattended, undervalued, and little understood by the executives of the company back in Syosset, New York. Fairchild leaders John Carter and Sherman Fairchild commanded the microcosm: the most important technology in the history of the human race. Noyce, Moore, Hoerni, Grove, Sporck, design genius Robert Widlar, and marketeer Jerry Sanders represented possibly the most potent management and technical team ever assembled in the history of world business. But, hey, you guys, don't forget to report back to Syosset. Don't forget who's boss. Don't give out any bonuses without clearing them through the folks at Camera and Instrument. You might upset some light-meter manager in Philadelphia.

They even made Charles Sporck, the manufacturing titan, feel like "a little kid pissing in his pants." Good work, Sherman, don't let the big lug put on airs, don't let him feel important. He only controls 80 percent of the company's growth. Widlar is leaving? Great, he never fit in with the corporate culture anyway. Sporck has gone off with Peter Sprague? There are plenty more where he came from.

"It was weird," said Grove, "they had no idea about what the company or the industry was like, nor did they seem to care. . . . Fairchild was just crumbling. If you wish, the semiconductor division management consisted of twenty significant players: eight went to National, eight went into Intel, and four of them went to Alcoholics Anonymous or something." Actually there were more than twenty and they went into startups all over the Valley; some twenty-six new semiconductor firms sprouted up between 1967 and 1970. "It got to the point," recalled one man quoted in Dirk Hanson's The New Alchemists, "where people were practically driving trucks over to Fairchild and loading up with employees."





Source:

Gilder, George. Microcosm: The Quantum Revolution in Economics and Technology. Paperback ed. New York: Touchstone, 1990.

(Note: the first ellipsis was added; the others were in the original. The italics were also in the original.)





December 17, 2009

"Every Physicist Wants Two Things: Glory and Money"



(p. 54) . . . in 1950, Shockley published his book Electrons and Holes in Semiconductors, which stood for many years as the definitive work in the field and confirmed his credentials for the Nobel Prize that he shared with Brattain and Bardeen in 1956. The fact was that for his theory of the field effect transistor that later dominated the industry and for the junction transistor that was dominating it at the time, Shockley deserved the prize alone. He had at last made his point.

Yet Shockley was not satisfied. "Every physicist," he said at the time, "wants two things: glory and money. I have won the glory. Now I want the money."





Source:

Gilder, George. Microcosm: The Quantum Revolution in Economics and Technology. Paperback ed. New York: Touchstone, 1990.

(Note: ellipsis added.)






December 14, 2009

Gilder's Microcosm Tells the Story of the Entrepreneurs Who Made Personal Computers Possible



MicrocosmBK.jpg















Source of book image: http://images.indiebound.com/923/705/9780671705923.jpg




Many years ago Telecosm was the first George Gilder book that I read; I enjoyed it for its over-the-top verbal exuberance in detailing, praising and predicting the progress of the then-new broadband technologies. I bought his earlier Microcosm at about the same time, but didn't get around to reading it because I assumed it would be a dated read, dealing in a similar manner with the earlier personal computer (PC) technology.

In the last year or so I have read Gilder's Wealth and Poverty and Recapturing the Spirit of Enterprise. There is some interesting material in Gilder's famous Wealth and Poverty, which has sometimes been described as one of the main intellectual manifestos of the Reagan administration. But Recapturing the Spirit of Enterprise has become my favorite Gilder book (so far).

In each chapter, the main modus operandi of that book is to present a case study of a recent entrepreneur, with plenty of interpretation of the lessons to be learned about why entrepreneurship is important to the economy, what sort of personal characteristics are common in entrepreneurs, and what government policies encourage or discourage entrepreneurs.

In that book I read that the original plan had been to include several chapters on the entrepreneurs who had built the personal computer revolution. But the original manuscript grew to unwieldy size, and so the personal computer chapters became the basis of the book Microcosm.

So Microcosm moved to the top of my "to-read" list, and turned out to be a much less-dated book than I had expected.

Microcosm does for the personal computer entrepreneurs what Recapturing the Spirit of Enterprise did for a broader set of entrepreneurs.

In the next few weeks, I will occasionally quote a few especially important examples or thought-provoking observations from Microcosm.




Reference to Gilder's MIcrocosm:

Gilder, George. Microcosm: The Quantum Revolution in Economics and Technology. Paperback ed. New York: Touchstone, 1990.


Other Gilder books mentioned:

Gilder, George. Recapturing the Spirit of Enterprise: Updated for the 1990s. updated ed. New York: ICS Press, 1992. (The first edition was called simply The Spirit of Enterprise, and appeared in 1984.)

Gilder, George. Telecosm: The World after Bandwidth Abundance. Paperback ed. New York: Touchstone, 2002.

Gilder, George. Wealth and Poverty. 3rd ed. New York: ICS Press, 1993.





December 6, 2009

Wind Power is Volatile and Unreliable, Especially When Power Demand is Highest



BPA_real_time_wind_ForJuly2009.png Graph of total electric power load and total wind power generation from the Bonneville Power Authority (BPA) for a week in late July 2009. Source of graph: http://blog.oregonlive.com/environment_impact/2009/07/real_time_wind.jpg


(p. A14) For more than a century, producing power has been a matter of flipping a switch. Need more electricity? Fire up some fuel. Need less? Dial the flame back down.

Things won't be that easy in a world that gets much of its energy from renewable sources, which come and go at nature's whim. Wind tends to blow hardest at night -- a problem, since people use electricity mostly during the day. Sunshine can lose its intensity in seconds if eclipsed by a cloud -- inconvenient for people who like their air conditioners to run steadily on summer days.


. . .


Most of the electricity in Bonneville's service area comes from hydroelectric power. To compensate for the volatility of wind, Bonneville tweaks the amount of water it lets through the dams. But that doesn't work for the most extreme shifts in wind. Sometimes, when the wind is blowing hard, Bonneville releases extra water over the tops of dams without using it to generate electricity. Otherwise, electrical wires might get overloaded. And when the wind is so strong that Bonneville can't ditch enough water, the utility orders wind turbines shut off.

"Everything changes with wind," says Bart McManus, a wind expert at Bonneville.

Sudden doldrums can be as troublesome as sudden gusts. That was the problem on Feb. 26, 2008, in Texas, which produces more wind power than any other state.

At 3 p.m. that afternoon, Texas's wind farms, concentrated in the western part of the state, were throwing off about 2,000 megawatts of electricity, enough to serve about one million households. Then a cold front blew in. By 6:30 p.m. -- when electricity demand typically peaks -- wind production in Texas had cratered to about 360 megawatts.

Exacerbating matters, Texans began turning up their heat -- much of which, in rural parts of the state, comes from electricity. So, just as wind power unexpectedly plummeted, demand for power spiked.



For the full commentary, see:

JEFFREY BALL. "Unbridled Energy: Predicting Volatile Wind, Sun
Utilities Ramp Up Focus on Forecasting When Renewable Fuel Is at a Peak to Avoid Squandering Power That Still Can't Be Stored." The Wall Street Journal (Fri., OCTOBER 5, 2009): A14.

(Note: ellipsis added.)

(Note: the last sentence of the quoted passage, appeared in the print edition, but was inexplicably deleted from the online version.)


For an updated "Near-Real-Time" graph of BPA load and wind generation, see:

http://www.transmission.bpa.gov/Business/Operations/Wind/baltwg.aspx






November 27, 2009

Incandescent Bulb Defended by Light Expert Who Relit Statue of Liberty



(p. A13) The Energy Independence and Security Act of 2007 will effectively phase out incandescent light bulbs by 2012-2014 in favor of compact fluorescent lamps, or CFLs. Other countries around the world have passed similar legislation to ban most incandescents.

Will some energy be saved? Probably. The problem is this benefit will be more than offset by rampant dissatisfaction with lighting. We are not talking about giving up a small luxury for the greater good. We are talking about compromising light. Light is fundamental. And light is obviously for people, not buildings. The primary objective in the design of any space is to make it comfortable and habitable. This is most critical in homes, where this law will impact our lives the most. And yet while energy conservation, a worthy cause, has strong advocacy in public policy, good lighting has very little.


. . .


As a lighting designer with more than 50 years of experience, having designed more than 2,500 projects including the relighting of the Statue of Liberty, I encourage people who care about their lighting to contact their elected officials and urge them to re-evaluate our nation's energy legislation so that it serves people, not an energy-saving agenda.




For the full commentary, see:

HOWARD M. BRANDSTON. "Save the Light Bulb!; Compact fluorescents don't produce good quality light." The Wall Street Journal (Mon., AUGUST 31, 2009): A13.

(Note: ellipsis added.)

(Note: the online version of the article is dated Sun., Aug. 30.)





October 31, 2009

Google Does Good



BookArkCartoon2009-10-23.jpg Source of cartoon: online version of the NYT commentary quoted and cited below.


(p. A25) . . . the vast majority of books ever written are not accessible to anyone except the most tenacious researchers at premier academic libraries. Books written after 1923 quickly disappear into a literary black hole. With rare exceptions, one can buy them only for the small number of years they are in print. After that, they are found only in a vanishing number of libraries and used book stores. As the years pass, contracts get lost and forgotten, authors and publishers disappear, the rights holders become impossible to track down.

Inevitably, the few remaining copies of the books are left to deteriorate slowly or are lost to fires, floods and other disasters. While I was at Stanford in 1998, floods damaged or destroyed tens of thousands of books. Unfortunately, such events are not uncommon -- a similar flood happened at Stanford just 20 years prior. You could read about it in The Stanford-Lockheed Meyer Library Flood Report, published in 1980, but this book itself is no longer available.

Because books are such an important part of the world's collective knowledge and cultural heritage, Larry Page, the co-founder of Google, first proposed that we digitize all books a decade ago, when we were a fledgling startup. At the time, it was viewed as so ambitious and challenging a project that we were unable to attract anyone to work on it. But five years later, in 2004, Google Books (then called Google Print) was born, allowing users to search hundreds of thousands of books. Today, they number over 10 million and counting.


. . .


In the Insurance Year Book 1880-1881, which I found on Google Books, Cornelius Walford chronicles the destruction of dozens of libraries and millions of books, in the hope that such a record will "impress the necessity of something being done" to preserve them. The famous library at Alexandria burned three times, in 48 B.C., A.D. 273 and A.D. 640, as did the Library of Congress, where a fire in 1851 destroyed two-thirds of the collection.

I hope such destruction never happens again, but history would suggest otherwise. More important, even if our cultural heritage stays intact in the world's foremost libraries, it is effectively lost if no one can access it easily. Many companies, libraries and organizations will play a role in saving and making available the works of the 20th century. Together, authors, publishers and Google are taking just one step toward this goal, but it's an important step. Let's not miss this opportunity.



For the full commentary, see:

SERGEY BRIN. "A Library to Last Forever." The New York Times (Fri., October 9, 2009): A25.

(Note: ellipses added.)

(Note: the online version is dated October 8th.)





September 19, 2009

Omaha's MidAmerican Energy "Is Ready to Assist BYD's Foray into the U.S. Auto Market"



WangChuanfuBYDchairman2009--09-7.jpg "Wang Chuanfu, the chairman of Chinese auto maker BYD, with one of the company's cars at the automobile show in Detroit in January." Source of photo and caption: online version of the WSJ article quoted and cited below.


(p. B5) XIAN, China -- BYD Co., the Chinese auto maker part-owned by Warren Buffett's company, is finalizing plans for an all-electric battery car that would be sold in the U.S. next year, ahead of the original schedule, Chairman Wang Chuanfu said.


. . .


One source of Mr. Wang's confidence in attacking the U.S. car market is BYD's ties with MidAmerican Energy Holding Co., the unit of Mr. Buffett's Berkshire Hathaway Inc. that paid about $230 million for a 9.9% stake in BYD.

MidAmerican Chairman David Sokol, who was also interviewed in Xian, said MidAmerican is ready to assist BYD's foray into the U.S. auto market in "any way we could be helpful." MidAmerican also might invest in BYD's new initiatives in the U.S., which, in addition to automobiles, could involve solar panels and battery technology for power utilities.

Mr. Sokol also said MidAmerican hopes to boost its BYD stake if the chance arises. "If in the future there is an opportunity for us to continue to invest in BYD, we will be happy to increase our stake over time, but we will do it in cooperation with BYD," he said. Mr. Wang said an increase is "negotiable."



For the full story, see:

NORIHIKO SHIROUZU. "BYD to Sell Electric Car in U.S. Market Next Year." The Wall Street Journal (Sat., AUGUST 22, 2009): B5.

(Note: ellipsis added.)





September 18, 2009

Obama Industrial Policy Risks Funding Dead Ends



(p. B1) President Obama has cast himself as a reluctant interventionist in two of the nation's major industries, Wall Street and Detroit. The federal aid, he says, is a financial bridge to a postcrisis future and the hand-holding will be temporary.

Even so, the scale of the government investment and control -- especially by the auto task force now vetting plans at Chrysler and General Motors -- points to an approach that has been shunned by the United States more than other developed nations.

"By any coherent definition, this is industrial policy," said Marcus Noland, a senior fellow at the Peterson Institute for International Economics.


. . .


(p. B7) . . . a more comprehensive, industrial-policylike approach to Detroit carries its own perils, economists say. In trying to manage the industrial shrinkage, they say, there is a fine line between easing the social impact and protecting jobs in ways that inhibit economic change and renewal. In pursuit of new growth, governments risk encouraging overinvestment in areas that prove to be technological dead ends.

In the Japanese experience, economists see evidence of both dangers. Problems, they say, are typically byproducts of what economists call "political capture." That is, an industrial sector earmarked for special government attention builds up its own political constituency, lobbyists and government bureaucrats to serve that industry. They slow the pace of change, and an economy becomes less nimble and efficient as a result.

Economists say the phenomenon is scarcely confined to nations with explicit industrial policies and cite the history of agricultural subsidies in America or military procurement practices.

But going down the path of industrial policy certainly holds that risk. "You have to bear in mind the opportunity costs of these kinds of government interventions, and remember that life is not an economic textbook and that politics can easily override economic rationality," said Mr. Noland, an author, with Howard Pack, of "Industrial Policy in an Era of Globalization: Lessons From Asia."




For the full story, see:

STEVE LOHR. "Highway to the Unknown; Forays in Industrial Policy Bring Risks." The New York Times (Weds., May 19, 2009): B1 & B7.

(Note: the online title is "In U.S., Steps Toward Industrial Policy in Autos.")

(Note: ellipses added.)


The full reference to Noland and Pack's book is:

Noland, Marcus, and Howard Pack. Industrial Policy in an Era of Globalization: Lessons from Asia, Policy Analyses in International Economics. Washington, D.C.: Peterson Institute, 2003.







September 17, 2009

Electric Mitsubishis and Nissans May Leapfrog Hybrid Toyotas



(p. B6) Both Nissan and Mitsubishi have their own reasons for rushing out an all-electric car. Having invested little in hybrids, they hope to leapfrog straight to the next technology.


. . .


"You don't see many competing technologies survive in a key market for very long," said Mr. Shimizu, the Keio University professor.

And more often than not in the history of innovation, a change in the dominant technology means a change in the market leader.

"Electric cars are a disruptive technology, and Toyota knows that," Mr. Shimizu said. "I wouldn't say Toyota is killing the electric vehicle. Perhaps Toyota is scared."



For the full story, see:

HIROKO TABUCHI. "The Electric Slide." The New York Times (Thursday, August 20, 2009): B1 & B6.

(Note: The online version of the article had the title: "Toyota, Hybrid Innovator, Holds Back in Race to Go Electric.")

(Note: ellipsis added.)





September 12, 2009

"Axel Springer Has Dared to Compete with Itself"



The European newspaper publisher Axel Springer, discussed in the story quoted below, appears to be following the advice of Christensen and Raynor in their book The Innovator's Solution. In that book, they suggest that incumbent firms need to be willing to set up units that compete with their older business models, if they hope to survive the introduction of disruptive innovations.


(p. B4) PARIS -- As the death toll in the American newspaper industry mounted this month, the German publisher Axel Springer, which owns Bild, the biggest newspaper in Europe, reported the highest profit in its 62-year history.


. . .


Axel Springer generates 14 percent of its revenue online, more than most American newspapers, even though the markets in which it operates -- primarily Germany and Eastern Europe -- are less digitally developed than the United States.

One reason, Mr. Döpfner said, is that Axel Springer has dared to compete with itself. Instead of trying to protect existing publications, it acquired or created new ones, some of which distribute the same content to different audiences.

At one newsroom in Berlin, for example, journalists produce content for six publications: the national newspaper Die Welt, its Sunday edition and a tabloid version aimed at younger readers; a local paper called Berliner Morgenpost, and two Web sites.



For the full story, see:

ERIC PFANNER. "European Newspapers Find Creative Ways to Thrive in the Internet Age." The New York Times (Mon., March 29, 2009): B4.

(Note: ellipsis added.)

The Christensen and Raynor book mentioned above, is:

Christensen, Clayton M., and Michael E. Raynor. The Innovator's Solution: Creating and Sustaining Successful Growth. Boston, MA: Harvard Business School Press, 2003.





September 10, 2009

Let Venture Capitalists Invest Their Own Money in Entrepreneurs



(p. A17) Venture-capital funds deal solely with privately purchased equity securities in start-up companies, which are not traded in public markets. They have as their limited partners only people who meet the S.E.C.'s definition of a "qualified client" (meaning they possess a substantial amount of money to invest). These investors, who typically allocate a small percentage of their portfolios to venture capital, are familiar with risk, but it is long-term risk, stretching out 7 to 10 years. They put their faith not in publicly traded securities but in entrepreneurs, emerging technologies and new markets.

Because their business is contained within the ecosystem of limited partners, venture-capital funds and the companies in which they invest absorb all the risk: there can be no domino effect in the world financial system.


. . .


It would be a shame to impose any new limits now, when venture capital is the asset class that can best help build and nurture the companies that bring about growth and job creation. The figures are compelling. In 2008, venture-backed companies that went public in previous years accounted for 12.1 million jobs and $2.9 trillion in revenues for the United States Treasury.

The names of companies financed by venture capital are legendary: Cisco, Google, Facebook, Apple, Federal Express, Staples, Yahoo, Amazon, Genentech and on and on. The privately purchased equity securities that helped start these companies supported new technological and scientific ideas, all of which led to new jobs.



For the full commentary, see:

ALAN PATRICOF and ERIC DINALLO. "Stopping Start-Ups." The New York Times (Mon., August 31, 2009): A17.

(Note: ellipsis added.)





September 8, 2009

Government Regulations Stifle Creative Venture Capital



(p. A9) This is a good time to recall that the venture-capital industry was born as a reaction to New Deal regulations that stifled capital and prolonged the Depression. The country's first venture-capital firm (other than family-run funds) was American Research and Development, planned in the 1930s and launched after World War II in Boston.

Its leader was longtime Harvard Business School professor Georges Doriot, who is the subject of a fascinating recent biography, "Creative Capital," by Spencer Ante. Mr. Ante, a BusinessWeek editor, tells me that as he researched the topic "one of the most surprising things I learned was how concerned financiers and industrialists had become about the riskless economy in direct response to the New Deal. Even in the 1930s, people understood that small business was the lifeblood of the economy."

American Research and Development backed early-stage companies deemed too risky by banks and investment trusts at the time. The firm was an early investor in Digital Equipment Corp., the Boston-area company that revolutionized computing.

Despite financial success, the history of the firm is a reminder that our regulatory system, by its nature focused on avoiding risk, has a hard time dealing with investment firms whose mission is to take risks. Doriot was a well-known name in commerce and academia from the 1940s through the 1970s. He was the first French graduate of Harvard Business School, a founder of the INSEAD business school and a leading adviser to the U.S. military.

But even as a pillar of Boston's commercial and academic worlds, Doriot had many run-ins with federal regulators. Over the years, regulators dictated compensation for the American Research and Development staff, tried to force disclosure of the performance of its early-stage companies, and second-guessed how it tracked the valuations of its investments.

The Securities and Exchange Commission hounded the company so often that Doriot once wrote a three-page memo saying, "ARD has more knowledge of what is right and wrong than the average person at the SEC." He was prudent enough not to send it. He did mail another memo to the SEC enforcement office in Boston, in 1965: "I rather resent, after 20 years of experience, to have two men come here, spend two days, and tell us that we do not know what we are doing."


. . .


No venture capital firm has asked to be bailed out, and none are too big to fail. As hard as it is for regulators to understand, the nature of venture capital is such that it should not even aspire to be a low-risk enterprise

.

For the full commentary, see:

L. GORDON CROVITZ. "No Such Thing as Riskless Venture Capital; New regulations could retard the innovation our economy needs." The Wall Street Journal (Weds., AUGUST 9, 2009): A19.

(Note: ellipsis added.)





August 29, 2009

Andy Grove's Case Against the Car Bailout



(p. A13) Imagine if in the middle of the computer transformation the Reagan administration worried about the upheaval and tried to rescue this vital industry by making huge investments in leading mainframe companies. The purpose of such investments would have been to protect the viability of these companies. The effect, however, would have been to put the brakes on transformation and all but ensure that the U.S. would lose its leadership role.

The government's investment in General Motors might be directly helpful if the auto industry only had the recession to contend with. But that is not the case. The industry faces the confluence of a world-wide recession, rising fuel prices, environmental demands, globalization of manufacturing, and, most importantly, technological change involving the very nature of the automobile.



For the full commentary, see:

ANDREW S. GROVE. "What Detroit Can Learn From Silicon Valley; Vertically integrated production is a thing of the past. Will the auto industry's new overseers catch on?" Wall Street Journal (Mon., JULY 13, 2009): A13.





July 27, 2009

Government Regulatory Costs Impede Energy Innovation



MetcalfeRobert_National_Medal_of_Technology.jpg














Robert Metcalfe receiving the National Medal of Technology in 2003. Source of photo: http://en.wikipedia.org/wiki/Robert_Metcalfe



The author of the commentary quoted below is famous in the history of information technology. His Harvard dissertation draft on packet switching was rejected as unrealistic. So he left the academy and became the main innovator responsible for making packet switching a reality, through the ethernet.

(He is also the "Metcalfe" behind "Metcalfe's Law" about the value of a network increasing at a faster rate than the increase in the network's size.)


(p. A15) . . . new small reactors meet important criteria for nuclear power plants. With no control rods to jam, they are far safer than the old models -- you might well call them nuclear batteries. By not using weapons-grade enriched fuels, they are nonproliferating. They minimize nuclear waste. And they're economical.


. . .


As venture capitalists, we at Polaris might have invested in one or two of these fission-energy start-ups. Alas, we had to pass. The problem with their business plans weren't their designs, but the high costs and astronomical risks of designing nuclear reactors for certification in Washington.

The start-ups estimate that it will cost each of them roughly $100 million and five years to get their small reactor designs certified by the Nuclear Regulatory Commission. About $50 million of each $100 million would go to the commission itself. That's a lot of risk capital for any venture-backed start-up, especially considering that not one new commercial nuclear reactor design has been approved and built in the United States for 30 years.


. . .

As we learned by building the Internet, fiercely competitive teams of research professors, graduate students, engineers, entrepreneurs and venture capitalists are the best drivers of technological innovation -- not big corporations, and certainly not government bureaucracies. So, if it's cheap and clean energy we want, we should clear the way for fission energy start-ups. We should lower the barriers at the Nuclear Regulatory Commission for the approval of new nuclear reactors, especially the new small ones. In particular, we should drop the requirement that the commission be reimbursed for reconsidering new fission reactor designs.



For the full commentary, see:

BOB METCALFE. "The New Nuclear Revolution; Safe fission power is our future -- if regulators allow it.." Wall Street Journal (Weds., JUNE 24, 2009): A15.

(Note: ellipses added.)





July 25, 2009

The Epistemological Implications of Wikipedia



WikipediaRevolutionBK.jpg














Source of book image: online version of the WSJ review quoted and cited below.




I think the crucial feature of Wikipedia is in its being quick (what "wiki" means in Hawaiian), rather than in its current open source model. Academic knowledge arises in a slow, vetted process. Publication depends on refereeing and revision. On Wikipedia (and the web more generally) knowledge is posted first, and corrected later.

In the actual fact, Wikipedia's coverage is vast, and its accuracy is high.

I speculate that Wikipedia provides clues to developing new, faster, more efficient knowledge generating institutions.

(Chris Anderson has a nice discussion of Wikipedia in The Long Tail, starting on p. 65.)


(p. A13) Until just a couple of years ago, the largest reference work ever published was something called the Yongle Encyclopedia. A vast project consisting of thousands of volumes, it brought together the knowledge of some 2,000 scholars and was published, in China, in 1408. Roughly 600 years later, Wikipedia surpassed its size and scope with fewer than 25 employees and no official editor.

In "The Wikipedia Revolution," Andrew Lih, a new-media academic and former Wikipedia insider, tells the story of how a free, Web-based encyclopedia -- edited by its user base and overseen by a small group of dedicated volunteers -- came to be so large and so popular, to the point of overshadowing the Encyclopedia Britannica and many other classic reference works. As Mr. Lih makes clear, it wasn't Wikipedia that finished off print encyclopedias; it was the proliferation of the personal computer itself.


. . .


By 2000, both Britannica and Microsoft had subscription-based online encyclopedias. But by then Jimmy Wales, a former options trader in Chicago, was already at work on what he called "Nupedia" -- an "open source, collaborative encyclopedia, using volunteers on the Internet." Mr. Wales hoped that his project, without subscribers, would generate its revenue by selling advertising. Nupedia was not an immediate success. What turned it around was its conversion from a conventionally edited document into a wiki (Hawaiian for "fast") -- that is, a site that allowed anyone browsing it to edit its pages or contribute to its content. Wikipedia was born.

The site grew quickly. By 2003, according to Mr. Lih, "the English edition had more than 100,000 articles, putting it on par with commercial online encyclopedias. It was clear Wikipedia had joined the big leagues." Plans to sell advertising, though, fell through: The user community -- Wikipedia's core constituency -- objected to the whole idea of the site being used for commercial purposes. Thus Wikipedia came to be run as a not-for-profit foundation, funded through donations.


. . .


It is clear by the end of "The Wikipedia Revolution" that the site, for all its faults, stands as an extraordinary demonstration of the power of the open-source content model and of the supremacy of search traffic. Mr. Lih observes that when "dominant encyclopedias" were still hiding behind "paid fire walls" -- and some still are -- Wikipedia was freely available and thus easily crawled by search engines. Not surprisingly, more than half of Wikipedia's traffic comes from Google.



For the full review, see:

JEREMY PHILIPS. "Business Bookshelf; Everybody Knows Everything." Wall Street Journal (Weds., March 18, 2009): A13.

(Note: ellipses added.)


The book being reviewed, is:

Lih, Andrew. The Wikipedia Revolution: How a Bunch of Nobodies Created the World's Greatest Encyclopedia. New York: Hyperion, 2009.





July 23, 2009

Increase in Prizes to Advance Innovation



SciencePrizes2009-06-20.jpgSource of graphic on past prizes: online version of the WSJ article quoted and cited below.


(p. A9) Are we impatient with NASA? Google offers $30 million in prizes for a better lunar lander. Do we like solving practical puzzles? InnoCentive Inc. has posted hundreds of lucrative research contests, offering cash prizes up to $1 million for problems in industrial chemistry, remote sensing, plant genetics and dozens of other technical disciplines. Perhaps we crave guilt-free fried chicken. The People for the Ethical Treatment of Animals offers a $1 million prize for the first to create test-tube poultry tissue that can be safely served for dinner.

Call it crowd-sourcing; call it open innovation; call it behavioral economics and applied psychology; it's a prescription for progress that is transforming philanthropy. In fields from manned spaceflight to the genetics of aging, prizes may soon rival traditional research grants as a spur to innovation. "We see a renaissance in the use of prizes to solve problems," says Tony Goland, a partner at McKinsey & Co. which recently analyzed trends in prize philanthropy.

. . .


Since 2000, private foundations and corporations have launched more than 60 major prizes, totaling $250 million in new award money, most of it focused on science, medicine, environment and technology, the McKinsey study found.


. . .


In growing numbers, corporate sponsors are embracing the prize challenge as a safe, inexpensive way to farm out product research, at a time when tight credit and business cutbacks have slowed innovation. Venture-capital investments have dropped by almost half since last year, reaching the lowest level since 1997, the National Venture Capital Association recently reported. "Here is a mechanism for off-balance-sheet risk-taking," says Peter Diamandis, founder of the X Prize Foundation. "A corporation can put up a prize that is bold and audacious with very little downside. You only pay the winner. It is a fixed-price innovation."



For the full article, see:

ROBERT LEE HOTZ. "SCIENCE JOURNAL; The Science Prize: Innovation or Stealth Advertising? Rewards for Advancing Knowledge Have Blossomed Recently, but Some Say They Don't Help Solve Big Problems." Wall Street Journal (Tues., May 8, 2009): A9.

(Note: ellipses added.)


The McKinsey study mentioned in the quotes above, was funded by the Templeton Foundation, and can be downloaded from:

McKinsey&Company. ""And the Winner Is ..." Capturing the Promise of Philanthropic Prizes." McKinsey & Company, 2009.

(Note: ellipsis in study title is in the original.)





July 20, 2009

Durant and Studebaker Made Transition from Carriage to Car



Christensen's theory of disruptive innovation predicts that incumbents will seldom survive a major disruption. So it is interesting that Durant and Studebaker, appear to have been exceptions, since they made the transition from producing carriages to producing cars. (Willie Durant founded General Motors in 1908.)


(p. 189) In 1900, fifty-seven surviving American automobile firms, out of hundreds of contenders, produced some 4,000 cars, three-quarters of which ran on steam or electricity. Companies famous for other products were entering the fray. Among them were the makers of the Pope bicycle, the Pierce birdcage, the Peerless wringer, the Buick bathtub, the White sewing machine, and the Briscoe garbage can. All vied for the market with stationary-engine makers, machine-tool manufacturers, and spinoffs of leading carriage firms, Durant and Studebaker. Among the less promising entrants seemed a lanky young engineer from Edison Illuminating Company named Henry Ford, whose Detroit Automobile Company produced twenty-five cars and failed in 1900.

. . .


(p. 191) Willie Durant, who knew all about production and selling from his carriage business, decided it was time to move into cars after several months of driving a prototype containing David Buick's valve-in-head engine--the most powerful in the world for its size--through rural Michigan in 1904. Within four years, Durant was to parlay his sturdy Buick vehicle into domination of the automobile industry, with a 25 percent share of the market in 1908, the year he founded General Motors.



Source:

Gilder, George. Recapturing the Spirit of Enterprise: Updated for the 1990s. updated ed. New York: ICS Press, 1992.

(Note: ellipsis added.)


Christensen's theory is most fully expressed in:

Christensen, Clayton M., and Michael E. Raynor. The Innovator's Solution: Creating and Sustaining Successful Growth. Boston, MA: Harvard Business School Press, 2003.





July 14, 2009

The Case for Patent System Reform



(p. A13) The Patent Office now gets some 500 million applications a year, leading to litigation costs of over $10 billion a year to define who has what rights. As Judge Richard Posner has written, patents for ideas create the risk of "enormous monopoly power (imagine if the first person to think up the auction had been able to patent it)." Studies indicate that aside from the chemical and pharmaceutical industries, the cost of litigation now exceeds the profits companies generate from licensing patents.


For the full commentary, see:

L. GORDON CROVITZ. "OPINION: INFORMATION AGE; Why Technologists Want Fewer Patents." The Wall Street Journal (Mon., JUNE 15, 2009): A13.






July 13, 2009

Justice Department is Creating Barriers to Companies Trying to Create New Technologies



BarrettCraigIntel2009-06-20.jpg















Intel CEO Craig Barrett. Source of caricature: online version of the WSJ article quoted and cited below.



(p. A9) Craig Barrett is spending the last days of his tenure as Intel chairman the same way he spent his previous 35 years at the corporation: moving at a superhuman pace that leaves exhausted subordinates in his wake.

Mr. Barrett has maintained this lifestyle since he replaced Andrew Grove as CEO of Intel in 1998. "Was it hard to follow a legend?" he asks himself in his typical blunt way, adding, "What do you think?" Mr. Barrett barely broke pace when he became chairman in 2005, and shows no sign of slowing even now, at age 69, as he faces retirement.


. . .


The latest thing that has him animated is the record $1.45 billion antitrust fine levied against Intel by the European Union this week. Mr. Barrett shakes his head and says, "The antitrust rules and regulations seem designed for a different era. When you look at high-tech companies, with the high R&D budgets, specialization and market creation they need to hold their big market shares, it's so very different from the old world of oil companies and auto makers that the antitrust regulations were designed for. They are out of sync with reality.

"And how do you reconcile European regulators, who don't believe that any company should have more than 50% market share -- even a market that company created -- with the way we operate here? Of course, now it seems as if our Justice Department is preparing to march in lock-step behind Europe. In the end, all they are going to do is create barriers to companies growing, entering into new markets, and bringing new technologies into those markets. And when we stop being the land of opportunity, all of those smart immigrant kids getting their Ph.D.s here are going to start heading home after they graduate. Then watch what happens to our competitiveness."



For the full story, see:

MICHAEL S. MALONE. "OPINION: THE WEEKEND INTERVIEW with Craig Barrett; From Moore's Law to Barrett's Rules; Intel's chairman on antitrust silliness and the secrets of high-tech success." Wall Street Journal (Sat., MARCH 16, 2009): A9.

(Note: ellipsis added.)





July 6, 2009

Our "Patently Absurd" Patent System



(p. A15) The Founders might have used quill pens, but they would roll their eyes at how, in this supposedly technology-minded era, we're undermining their intention to encourage innovation. The U.S. is stumbling in the transition from their Industrial Age to our Information Age, despite the charge in the Constitution that Congress "promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries."


. . .

Both sides may be right. New empirical research by Boston University law professors James Bessen and Michael Meurer, reported in their book, "Patent Failure," found that the value of pharmaceutical patents outweighed the costs of pharmaceutical-patent litigation. But for all other industries combined, they estimate that since the mid-1990s, the cost of U.S. patent litigation to alleged infringers ($12 billion in legal and business costs in 1999) is greater than the global profits that companies earn from patents (less than $4 billion in 1999). Since the 1980s, patent litigation has tripled and the probability that a particular patent is litigated within four years has more than doubled. Small inventors feel the brunt of the uncertainty costs, since bigger companies only pay for rights they think the system will protect.

These are shocking findings, but they point to the solution. New drugs require great specificity to earn a patent, whereas patents are often granted to broad, thus vague, innovations in software, communications and other technologies. Ironically, the aggregate value of these technology patents is then wiped out through litigation costs.

Our patent system for most innovations has become patently absurd. It's a disincentive at a time when we expect software and other technology companies to be the growth engine of the economy. Imagine how much more productive our information-driven economy would be if the patent system lived up to the intention of the Founders, by encouraging progress instead of suppressing it.



For the full commentary, see:

L. GORDON CROVITZ. "OPINION: INFORMATION AGE; Patent Gridlock Suppresses Innovation." Wall Street Journal (Mon., JULY 14, 2008): A15.

(Note: ellipsis added.)





July 3, 2009

Berkshire BYD Technology Bet Based on Munger's View of BYD Manager



MungerCharlie2009-06-19.jpg











"BOOK VALUE: Berkshire Hathaway's Charles Munger reads businesses well -- and, as a bibliophile, he goes through several books a week." Source of caricature and caption: online version of the WSJ article quoted and cited below.



At a Berkshire Hathaway annual meeting a few years ago, I remember hearing Warren Buffett say that he stays away from technology stocks because he does not know how to judge which technologies are likely to succeed in the long-run. So I was a bit puzzled by the news that Berkshire Hathaway was investing in BYD, a Chinese company producing an electric car.

The passages quoted below may partially solve the puzzle: the investment in BYD was pushed by Charlie Munger and David Sokol, and was based more on a judgment about the quality of BYD's management, than the prospects for BYD's technology.


(p. C1) Mr. Munger's views have pushed Berkshire into some surprising directions. Several years ago, Mr. Munger learned of an obscure Chinese maker of batteries and automobiles called BYD Inc., which hopes to create a cheap, functional electric car.

A Chinese tech company is nothing like the shoe and underwear makers Berkshire had been buying. But Mr. Munger was enthusiastic, less about the technology than about Wang Chuanfu, who runs BYD. Mr. Wang, Mr. Munger says, is "likely to be one of the most important business people who ever lived."

Mr. Buffett was skeptical at first. But Mr. Munger persisted. David Sokol, chairman of Berkshire utility MidAmerican Energy Holdings Co., paid a visit to BYD's factory in China and agreed with Mr. Munger's assessment. Last year, MidAmerican paid $230 million for a 10% stake in BYD.

"BYD was Charlie's idea," Mr. Buffett said. "When he encounters genius and sees it operating in a practical way, he gets blown away."




For the full story, see:

SCOTT PATTERSON. "Here's the Story on Berkshire's Munger." Wall Street Journal (Fri., MAY 1, 2009): C1 & C3.






May 31, 2009

Entrepreneurs, Not MITI, Decided Japan Outcomes in '60s, '70s and '80s



(p. 164) Ishibashi's regime was followed in the early 1960s by the "income-doubling campaign" of his associate Hayato Ikeda, who assumed power in 1961 and continued the supply-side thrust. The result was a steady upsurge of domestic growth, with firms and industries rapidly gaining experience in intense rivalries at home before entering the global arena as low-cost producers, and with government cutting taxes and increasing revenues and savings.

It is from this domestic crucible of intense competition with normal rates of bankruptcy far above those in the United States, with scores of rivals in every field, that the great Japanese companies have emerged. At various times during the last three decades, for example, there have been 58 integrated steel firms, 50 motorbike companies, 12 auto firms, 42 makers of hand-held calculators, 13 makers of facsimile machines, and 250 producers of robots. Overlooking this welter are always the crested bureaucrats of MITI, sometimes offering useful aid and guidance--but at the center, deciding outcomes, have always been the entrepreneurs.



Source:

Gilder, George. Recapturing the Spirit of Enterprise: Updated for the 1990s. updated ed. New York: ICS Press, 1992.





May 27, 2009

"Dynamism Has Been Leached From Our System," But Not from Our Brains or Our Hearts



Sometimes one of Peggy Noonan's columns reminds us that she was once one of Ronald Reagan's best speech writers:


(p. A11) I heard a man named Nathan Myhrvold speak of a thing called Microsoft. I saw a young man named Steve Jobs prowl a New York stage and unveil a computer that then we thought tiny and today we'd call huge. A man named Steve Wozniak became a household god as my son reported his visionary ways. It was a time so full of genius and dynamism that it went beyond words like "breakthrough" and summoned words like "revolution." If you were paying attention, if you understood you were witnessing something great, the invention of a new age, the computer age, it caught at your throat. It was like hearing great music. People literally said what had been said in the age of Thomas Edison: "What will they think of next?" What a buoyant era.


. . .


And for a moment, as I sent and received my first airborne Wi-Fi emails, I was back there. And I was moved because I realized how much I missed it, how much we all do, that "There are no walls" feeling. "Think different." "On January 24th, Apple Computer will introduce Macintosh. And you'll see why 1984 won't be like '1984.' " That was 25 years ago. The world was on fire.

It has cooled. And the essential problem with the crash we're in is no one can imagine quite feeling that way again. People can remember it, but they can't quite resummon it.


. . .


I end with a hunch that is not an unhappy one. Dynamism has been leached from our system for now, but not from the human brain or heart. Just as our political regeneration will happen locally, in counties and states that learn how to control themselves and demonstrate how to govern effectively in a time of limits, so will our economic regeneration. That will begin in someone's garage, somebody's kitchen, as it did in the case of Messrs. Jobs and Wozniak. The comeback will be from the ground up and will start with innovation. No one trusts big anymore. In the future everything will be local. That's where the magic will be. And no amount of pessimism will stop it once it starts.




For the full commentary, see:

PEGGY NOONAN. "Remembering the Dawn of the Age of Abundance; Times are hard, but dynamism isn't dead." Wall Street Journal (Sat., Feb. 21, 2009): A11.

(Note: ellipses added.)





May 4, 2009

Do Recessions Sometimes Encourage Creative Destruction?



DesktopPCbroken2009-02-15.jpg Source of image: online version of the NYT article quoted and cited below.


(p. B1) The dot-com bust earlier in the decade dragged down high-fliers like Sun Microsystems and America Online but set the stage for a new generation of Web powerhouses like Google and other innovative Internet software companies like Salesforce.com, founded on disrupting the status quo.

The recession of the early 1990s sent I.B.M., then the dominant force in technology, into a five-year tailspin. But it also propelled Microsoft and Compaq, later acquired by Hewlett-Packard, and Dell to the forefront of computing.

Indeed, Silicon Valley may be one of the few places where businesses are still aware of the ideas of Joseph Schumpeter, an Austrian economist who wrote about business cycles during the first half of the last century. He said the lifeblood of capitalism was "creative destruction." Companies rising and falling would unleash innovation and in (p. B4) the end make the economy stronger.

Recessions "can cause people to think more about the effective use of their assets," said Craig R. Barrett, the retiring chairman of Intel, who has seen 10 such downturns in his long career. "In the good times, you can get a bit careless or not focused as much on efficiency. In bad times, you're forced to see if there is a technology" that will help.

So who's up, who's down and who's out this time around? Microsoft's valuable Windows franchise appears vulnerable after two decades of dominance. Revenue for the company's Windows operating system fell for the first time in history in the last quarter of 2008. The popularity of Linux, a free operating system installed on many netbooks instead of Windows, forced Microsoft to lower the prices on its operating system to compete.

Intel's high-power processors are also under assault: revenue tumbled by 23 percent last quarter, marking the steepest decline since 1985.

Meanwhile, more experimental but lower-cost technologies like netbooks, Internet-based software services (called cloud computing) and virtualization, which lets companies run more software on each physical server, are on the rise.



For the full story, see:

BRAD STONE and ASHLEE VANCE. "$200 Laptops Break a Business Model." The New York Times (Mon., January 25, 2009): B1 & B4.






May 3, 2009

Most Great Inventors Were Blessed with Leisure Time



(p. 49) With his wife running the household and tending to their four-year-old daughter, Sally, Priestley simply had more time on his hands to explore, invent, and write. Priestley was retracing a pattern that Franklin had originally carved two decades before, when he handed over day-to-day operation of his printing business to his foreman, David Hall, in 1748 and then spent the next three years transforming the science of electricity. Necessity may be the mother of invention, but most of the great inventors were blessed with something else: leisure time.


Source:

Johnson, Steven. The Invention of Air: A Story of Science, Faith, Revolution, and the Birth of America. New York: Riverhead Books, 2008.





May 2, 2009

GM's Saturn Shows Problems With Incumbent Firms Disrupting Themselves



SaturnFirstCarSpringHill1990.jpg "In July 1990, the first Saturn rolled off the Spring Hill, Tenn., assembly line, with Roger Smith of General Motors holding the key." Source of the caption and the photo: online version of the NYT article quoted and cited below.


Clayton Christensen has shown that incumbent firms find it extremely difficult to adopt disruptive innovations that would leapfrog their current dominant business model. GM's abandonment of its Saturn experiment would seem to be an apt illustration of the point:

(p. A29) "I'm absolutely convinced that the Saturn way could have worked," said Michael Bennett, the original U.A.W. leader at Saturn. "But what we had was never embraced or adopted."

Mr. Bennett, like many others, can point fingers to explain why Saturn fell short of its promise.

Mr. Bennett blamed a lack of interest by G.M. executives who succeeded Roger Smith, who as chief executive in the 1980s committed $5 billion to begin Saturn.

But those who followed him -- including John F. Smith Jr., who became chief executive in 1992, and G.M.'s current chief executive, Rick Wagoner, who ran its North American operations in the 1990s -- had bigger worries.

They had to lead the company through the financial turbulence at G.M. in the early 1990s. And with managers at G.M.'s other, older brands begging for investment, G.M. executives declared Saturn would have to prove it deserved more support, even though its small cars were accomplishing their main goal of winning buyers from imports.

Despite G.M.'s pledge that Saturn would be run as a separate company, with its own car development and purchasing operations, it was folded into G.M.'s small-car operations in 1994, and its lineup did not receive any new models for the next five years.



For the full story, see:

MICHELINE MAYNARD. "With Saturn, G.M. Failed a Makeover." The New York Times (Thurs., December 3, 2008): A1 & A29.

Christensen's fullest complete expression of his views can be found in:

Christensen, Clayton M., and Michael E. Raynor. The Innovator's Solution: Creating and Sustaining Successful Growth. Boston, MA: Harvard Business School Press, 2003.


SaturnLastCarSpringHill2007.jpg "The final Saturn built at the plant in March 2007." Source of the caption and the photo: online version of the NYT article quoted and cited above.





April 29, 2009

World Astonished that an American Tradesman Tamed Lightning



(p. 24) Within five years of his speculative note to Collinson, lightning rods had become a common sight on church steeples throughout Europe and America. Franklin's biographer Carl Van Doren aptly describes the astonishment that greeted these events around the world: "A man in Philadelphia in America, bred a tradesman, remote from the learned world, had hit upon a secret which enabled him, and other men, to catch and tame the lightning, so dread that it was still mythological."


Source:

Johnson, Steven. The Invention of Air: A Story of Science, Faith, Revolution, and the Birth of America. New York: Riverhead Books, 2008.





April 18, 2009

Economists Find TV Improved Children's Cognitive Ability



TVkids.jpg







Source of photo: online version of the WSJ article quoted and cited below.


(p. A1) It didn't take long after America started tuning in to television that people started to worry about what it was doing to children. "When it offers a daily diet of Western pictures and vaudeville by the hour, television often seems destined to entertain the child into a state of mental paralysis," wrote The New York Times in 1949.

A generation later, the Scholastic Aptitude Test scores of college-bound teenagers had fallen significantly. A 1977 panel appointed by the College Entrance Examination Board suggested television bore some blame for the drop. Indeed, the decline began in the mid-1960s, just as the first students heavily exposed to TV took their SATs.

But University of Chicago Graduate School of Business economists Matthew Gentzkow and Jesse Shapiro aren't sure that TV has been all that bad for kids. In a paper published in the Quarterly Journal of Economics this year, they presented a series of analyses that showed that the advent of television might actually have had a positive effect on children's cognitive ability.

. . .


(p. A8) The economists . . . looked at results of a survey of 800 U.S. schools that administered tests to 346,662 sixth-grade, ninth-grade and 12th-grade students in 1965. Their finding: Adjusting for differences in household income, parents' educational background and other factors, children who lived in cities that gave them more exposure to television in early childhood performed better on the tests than those with less exposure.

The economists found that television was especially positive for children in households where English wasn't the primary language and parents' education level was lower. "We don't exactly know why that is, but a plausible interpretation is that the effect of television on cognitive development depends on what other kinds of activity television is substituting for," says Mr. Shapiro, 28.



For the full story, see:

JUSTIN LAHART. "A New View On TV; Economists Probe the Data on Television Watching And Find It's Not All Bad; Better Test Scores?" The Wall Street Journal (Sat., SEPTEMBER 6, 2008): A1 & A8.

(Note: ellipses added.)


If you are interesting in further reading that is in the same vein as the article above, consult:

Johnson, Steven. Everything Bad Is Good for You. New York: Riverhead Trade, 2006.





April 10, 2009

Instead of Government Money, Benson "Just Wanted the Opportunity to Compete"


BensonJim.jpg















"Jim Benson" Source of caption and photo: online version of the WSJ obituary quoted and cited below.


(p. A10) "A number of people had told me they wanted to start space businesses," Mr. Huntress says, "but they always wanted government money. Jim said he didn't want any government money. He just wanted the opportunity to compete. That got my attention."

Mr. Benson, who died Oct. 10 at age 63 of a brain tumor, put it directly: "If we're going to space to stay, space has to pay."

He thought he'd found a business model. "We offer FedEx-like package delivery rides," he proclaimed in 1999. He imagined getting customers like NASA itself and the armed forces, as well as scientists and industry. Always looking for an angle, he also envisioned a more terrestrial use for his rockets: sending a package from San Jose, Calif., to Taipei in 20 minutes.

With organizational ability he developed at software start-ups in the 1980s, Mr. Benson assembled a team of mostly young engineers plus some NASA veterans and set to work. To avoid high development costs, he used off-the-shelf technologies and designs. He quickly landed several contracts, including one from the University of California at Berkeley for ChipSat, a small satellite built for carrying scientific instruments to study interstellar gas. It cost $7 million to build -- peanuts in space bucks -- and has continued to function since its 2003 launch.



For the full obituary, see:

STEPHEN MILLER. "REMEMBRANCES; Jim Benson (1945 - 2008); Rocket Man Ran a Proper Business, But Loftiest Plans Were Ill-Starred." The Wall Street Journal (Sat., OCTOBER 18, 2008): A10.





April 8, 2009

"The Vast Inefficiencies of Public Sector Airports"


MidwayAirport2009-02-15.jpg "One aviation expert said the Midway deal was a way to overcome inefficiencies of public airports." Source of caption and photo: online version of the NYT article quoted and cited.

(p. A16) CHICAGO -- Midway Airport is poised to become the first large privately run hub airport in the country, officials said Tuesday, after an investment group bid $2.52 billion to win rights to a long-term lease.

. . .

An aviation expert at the Brookings Institution, Clifford Winston, said he saw the deal's attractiveness as helping to overcome "the vast inefficiencies of public sector airports."

"The Midway experiment is important," Mr. Winston said, "but it's only a tiny step."



For the full story, see:

SUSAN SAULNY. "In Chicago, Private Firm Is to Run Midway Airport." The New York Times (Weds., October 1, 2008): A16.

(Note: ellipsis added.)




April 4, 2009

Myhrvold Claims His Patent Purchases Benefit Small-Time Inventors


PatentSettlementGraph.gif Source of graph: online version of the WSJ article quoted and cited below.


(p. A1) Millionaire Nathan Myhrvold, renowned in the computer industry as a Renaissance man, has a less lofty message for tech companies these days: Pay up.

Over the past few years, the former Microsoft Corp. executive has quietly amassed a trove of 20,000-plus patents and patent applications related to everything from lasers to computer chips. He now ranks among the world's largest patent-holders -- and is using that clout to press tech giants to sign some of the costliest patent-licensing deals ever negotiated.

. . .

(p. A21) Mr. Myhrvold says the fact he doesn't make actual products is irrelevant. He stresses that Intellectual Ventures helps small-time inventors by providing them with an aggressive buyer to sell their patents to.

Intellectual Ventures, which has about $5 billion under management, bears some similarities to a private-equity firm that operates investment funds for the benefit of investors. However, its largest fund has an unusual structure in which fund investors are also responsible for the lion's share of the fund's returns.

It works like this: Technology companies agree to pay patent-licensing fees to inoculate themselves against potential lawsuits by Intellectual Ventures. These fees are how the fund generates its returns. As part of the deal, though, these same companies also put up the cash Mr. Myhrvold uses to buy more patents, receiving an equity stake in the fund in return.



For the full story, see:

AMOL SHARMA and DON CLARK. "Tech Guru Riles the Industry By Seeking Huge Patent Fees." The Wall Street Journal (Weds., SEPTEMBER 17, 2008): A1 & A21.

(Note: ellipsis added.)


MyhrvoldNathan2009-02-15.jpg





"Nathan Myhrvold's message for tech firms: Pay up." Source of caption and photo: online version of the WSJ article quoted and cited above.





March 31, 2009

Congress Blocked Navy's Grab of Radio Airwaves


HelloEverybodyBK.jpg













Source of book image: online version of the WSJ review quoted and cited below.




(p. A15) "Hello Everybody!" is at its most valuable when it chronicles the early regulatory fights over the new medium. In the days after World War I, the Navy pushed hard for control of all "wireless" facilities, which were then used primarily used for point-to-point messaging. If the admirals had succeeded in that grab, which was blocked by Congress, the advent of broadcast radio would no doubt have been delayed and the industry might have developed more along the lines of European radio, with a great deal of government control.


For the full review, see:

RANDALL BLOOMQUIST. ""Bookshelf; A Journey Across the Dial." The Wall Street Journal (Thurs., OCTOBER 9, 2008): A15.

The reference to the book under review, is:

Rudel, Anthony. Hello, Everybody! Orlando, FL: Houghton Mifflin Harcourt Publishing Company, 2008.





March 22, 2009

"Venturesome" Consumers May Help Save the Day


Bhide makes thought-provoking comments about the role of the entrepreneurial or "venturesome" consumer in the process of innovation. The point is the mirror image on one made by Schumpeter in Capitalism, Socialism and Democracy when he emphasized that consumer resistance to innovation is one of the obstacles that entrepreneurs in earlier periods had to overcome. (The decline of such consumer resistance was one of the reasons that Schumpeter speculated that the entrepreneurial might become obsolete.)

I would like to see Bhidé's evidence on his claim that technology rapidly advanced during the Great Depression. The claim seems at odds with Amity Shlaes' claim that New Deal policies often discouraged entrepreneurship.

(p. A15) Consumers get no respect -- we value thrift and deplore the spending that supposedly undermines the investment necessary for our long-run prosperity. In fact, the venturesomeness of consumers has nourished unimaginable advances in our standard of living and created invaluable human capital that is often ignored.

Economists regard the innovations that sustain long-run prosperity as a gift to consumers. Stanford University and Hoover Institution economist Paul Romer wrote in the "Concise Encyclopedia of Economics" in 2007: "In 1985, I paid a thousand dollars per million transistors for memory in my computer. In 2005, I paid less than ten dollars per million, and yet I did nothing to deserve or help pay for this windfall."

In fact, Mr. Romer and innumerable consumers of transistor-based products such as personal computers have played a critical, "venturesome" role in generating their windfalls.

. . .

History suggests that Americans don't shirk from venturesome consumption in hard times. The personal computer took off in the dark days of the early 1980s. I paid more than a fourth of my annual income to buy an IBM XT then -- as did millions of others. Similarly, in spite of the Great Depression, the rapid increase in the use of new technologies made the 1930s a period of exceptional productivity growth. Today, sales of Apple's iPhone continue to expand at double-digit rates. Low-income groups (in the $25,000 to $49,999 income segment) are showing the most rapid growth, with resourceful buyers using the latest models as their primary device for accessing the Internet.

Recessions will come and go, but unless we completely mess things up, we can count on our venturesome consumers to keep prosperity on its long, upward arc.



For the full commentary, see:

Amar Bhidé. "Consumers Can Still Spot Value in a Crisis." Wall Street Journal (Thurs., MARCH 11, 2009): A15.

(Note: ellipsis added.)




March 18, 2009

Entrepreneurs Are Key to Ending Economic Crisis


(p. A15) The passage of the $787 billion stimulus bill has so far failed to stimulate anything but greater market pessimism. This suggests to us that the strategy behind the American Reinvestment and Recovery Act is wrong -- and worse, that the weapons it is using to fight the recession are obsolete.

Just as generals are notorious for fighting the last war, Congress and the White House seem intent on fixing an economy of hidebound and obsolete companies and industries, while ignoring the innovative ones rising before us and those waiting to be born.

Missing from this legislation is anything more than token support for the long-proven source of most new jobs and new growth in America: entrepreneurs. These are the people who gave us everything -- from Wal-Mart to iPhones, from microprocessors to Twitter -- that is still strong in our economy. Without entrepreneurs, we will never get out of our current predicament.



For the full commentary, see:

TOM HAYES and MICHAEL S. MALONE. "Entrepreneurs Can Lead Us Out of the Crisis What Are the Odds of a Depression?" Wall Street Journal (Tues., FEBRUARY 24, 2009): A15.

(Note: ellipses added.)




March 14, 2009

Bailouts Reduce Resources Left for Entrepreneurs


Columbia University Professor Amar Bhidé has authored two important books on entrepreneurship. Some of his thoughts on the current economic crisis follow:

(p. A15) Our ignorance of what causes economic ailments -- and how to treat them -- is profound. Downturns and financial crises are not regular occurrences, and because economies are always evolving, they tend to be idiosyncratic, singular events.

After decades of diligent research, scholars still argue about what caused the Great Depression -- excessive consumption, investment, stock-market speculation and borrowing in the Roaring '20s, Smoot-Hawley protectionism, or excessively tight monetary policy? Nor do we know how we got out of it: Some credit the New Deal while others say that that FDR's policies prolonged the Depression.

. . .

Large increases in public spending usurp precious resources from supporting the innovations necessary for our long-term prosperity. Everyone isn't a pessimist in hard times: The optimism of many entrepreneurs and consumers fueled the takeoff of personal computers during the deep recession of the early 1980s. Amazon has just launched the Kindle 2; its (equally pricey) predecessor sold out last November amid the Wall Street meltdown. But competing with expanded public spending makes it harder for innovations like the personal computer and the Kindle to secure the resources they need.

Hastily enacted programs jeopardize crucial beliefs in the value of productive enterprise. Americans are unusually idealistic and optimistic. We believe that we can all get ahead through innovations because the game isn't stacked in favor of the powerful. This belief encourages the pursuit of initiatives that contribute to the common good rather than the pursuit of favors and rents. It also discourages the politics of envy. We are less prone to begrudge our neighbors' fortune if we think it was fairly earned and that it has not come at our expense -- indeed, that we too have derived some benefit.

To sustain these beliefs, Americans must see their government play the role of an even-handed referee rather than be a dispenser of rewards or even a judge of economic merit or contribution. The panicky response to the financial crisis, where openness and due process have been sacrificed to speed, has unfortunately undermined our faith. Bailing out AIG while letting Lehman fail -- behind closed doors -- has raised suspicions of cronyism. The Fed has refused to reveal to whom it has lent trillions. Outrage at the perceived use of TARP funds to pay bonuses is widespread.



For the full commentary, see:

Amar Bhidé. "Don't Believe the Stimulus Scaremongers." Wall Street Journal (Tues., FEBRUARY 17, 2009): A15.

(Note: ellipsis added.)


Bhidé's two books on entrepreneurship are:

Bhidé, Amar. The Origin and Evolution of New Business. Oxford and New York: Oxford University Press, 2000.

Bhidé, Amar. The Venturesome Economy: How Innovation Sustains Prosperity in a More Connected World. Princeton, NJ: Princeton University Press, 2008.




February 9, 2009

Google and Lessig Finally See that So-Called "Network Neutrality" Delays Progress



InternetTrafficGraph.gif







Source of graphic: online version of the WSJ article quoted and cited below.


(p. A1) The celebrated openness of the Internet -- network providers are not supposed to give preferential treatment to any traffic -- is quietly losing powerful defenders.

Google Inc. has approached major cable and phone companies that carry Internet traffic with a proposal to create a fast lane for its own content, according to documents reviewed by The Wall Street Journal. Google has traditionally been one of the loudest advocates of equal network access for all content providers.

At risk is a principle known as network neutrality: Cable and phone companies that operate the data pipelines are supposed to treat all traffic the same -- nobody is supposed to jump the line.

But phone and cable companies argue that Internet content providers should share in their network costs, particularly with Internet traffic growing by more than 50% annually, according to estimates. Carriers say that to keep up with surging traffic, driven mainly by the proliferation of online video, they need to boost revenue to upgrade their networks. Charging companies for fast lanes is one option.

One major cable operator in talks with Google says it has been reluctant so far to strike a deal because of concern it might violate Federal Communications Commission guidelines on network neutrality.

"If we did this, Washington would be on fire," says one execu-(p. A6)tive at the cable company who is familiar with the talks, referring to the likely reaction of regulators and lawmakers.

(p. A6) Separately, Microsoft Corp. and Yahoo Inc. have withdrawn quietly from a coalition formed two years ago to protect network neutrality. Each company has forged partnerships with the phone and cable companies. In addition, prominent Internet scholars, some of whom have advised President-elect Barack Obama on technology issues, have softened their views on the subject.

. . .

. . . Lawrence Lessig, an Internet law professor at Stanford University and an influential proponent of network neutrality, recently shifted gears by saying at a conference that content providers should be able to pay for faster service. Mr. Lessig, who has known President-elect Barack Obama since their days teaching law at the University of Chicago, has been mentioned as a candidate to head the Federal Communications Commission, which regulates the telecommunications industry.



For the full story, see:

VISHESH KUMAR and CHRISTOPHER RHOADS. "Google Wants Its Own Fast Track on the Web." Wall Street Journal (Mon., DECEMBER 15, 2008): A1 & A6.

(Note: ellipses added.)




February 5, 2009

Inventors Move from Declining Industries to New, Expanding Industries


Petra Moser's comments (see below) about inventors applying similar ideas to different industries seem complementary to Burke's emphasis on the importance of serendipitous "connections." An inventor exposing herself to many industries' problems and products, would be more likely to see additional applications for inventions originally developed for another industry.

(p. 3) By some logic, there is no earthly reason why bicycles should still exist.

They are a quaint, 19th-century invention, originally designed to get someone from point A to point B. Today there are much faster, far less labor-intensive modes of transportation. And yet hopeful children still beg for them for Christmas, healthful adults still ride them to work, and daring teenagers still vault them down courthouse steps. The bicycle industry has faced its share of disruptive technologies, and it has repeatedly risen from the ashes.

. . .

"Much of the history of the 'American system of manufacturing' is the story of inventors moving from a declining industry to a new expanding industry," says Petra Moser, an economic historian at Stanford who studies innovation. "Inventors take their skills with them."

Gun makers learned to make revolvers with interchangeable parts in the mid-19th century, Ms. Moser says. Then those companies (and some former employees, striking out on their own) applied those techniques to sewing machines when demand for guns slackened. Later, sewing machine manufacturers began making woodworking machinery, bicycles, cars and finally trucks.

. . .

Meanwhile, we've already seen some of the "destruction" half of Joseph Schumpeter's famous "creative destruction" paradigm, with many newspapers cutting staff and other production costs. Unfortunately for newspapers, historians say, the survivors in previous industries facing major technological challenges were usually individual companies that adapted, rather than an entire industry. So a bigger shakeout may yet come.

But perhaps the destruction will lead to more creativity. Perhaps the people we now know as journalists -- or, for that matter, autoworkers -- will find ways to innovate elsewhere, just as, over a century ago, gun makers laid down their weapons and broke out the needle and thread. That is, after all, the American creative legacy: making innovation seem as easy as, well, riding a bike.



For the full commentary, see:

CATHERINE RAMPELL. "Ideas & Trends; How Industries Survive Change. If They Do." The New York Times, Week in Review Section (Sun., November 15, 2008): 3.

(Note: ellipses added.)




January 21, 2009

"In Spite of the Economic Crisis and Unemployment . . . Civilization's Progress is Going Faster and Faster"


The Palace of Discovery mentioned in the passage below was a part of the 1937 Paris Exposition.

(p. 206) The mastermind behind the Palace of Discovery, French Nobel Prize laureate Jean Perrin, wrote, "In spite of the wars and the revolutions, in spite of the economic crisis and unemployment, through our worries and anxieties, but also through our hopes, civilization's progress is going faster and faster, thanks to ever-more flexible and efficient techniques, to farther- and farther-reaching lengths. . . . Almost all of them have appeared in less than a century, and have developed or applied inventions now known by all, which seem to have fulfilled or even passed the desires expressed in our old fairy tales."


Source:

Hager, Thomas. The Demon under the Microscope: From Battlefield Hospitals to Nazi Labs, One Doctor's Heroic Search for the World's First Miracle Drug. New York: Three Rivers Press, 2007.

(Note: ellipsis in the title is added; ellipsis in the quoted passage is in the original.)




January 17, 2009

Since Wire Rope Had Not Been Tried, Entrepreneur Roebling Had to Self-Finance His Innovation


(p. 178) It was a bridge across the Niagara that would change life for the nail and wire makers. In 1831 a German engineer had emigrated from Mühlhausen in Saxony to America, where he founded the city (p. 179) of Saxonburg, Pennsylvania (having refused to settle in the American South because of his views on slavery). He then worked as a farmer, as a surveyor on the Pennsylvania Canal and finally as a railway engineer. His name was John Roebling, and he had a strange obsession with wire ropes. Since nobody in America had ever tried to make that kind of rope, the idea was not easy to promote. After failing to interest the firm of Washburn & Company, in Worcester, Massachusetts (we will return to this form in our story), in 1848 Roebling moved to Trenton, New Jersey, and set up on his own.

After practicing his technique on a number of small bridges in Pennsylvania and Delaware, Roebling finally got a contract for the 3,640 wires into a compact, uniformly tensioned wire cable. Then, using a kite to get the cable to the other side of the river, he went on to finish the first-ever wire suspension bridge, 821 feet in length and strong enough to take the full weight of a train. The bridge opened to rail traffic on March 16, 1855.

Because of his success at Niagara, Roebling's cable-spinning technique soon became standard on all suspension bridges. He put his name in the history books with his next job: the Brooklyn Bridge.



Source:

Burke, James. The Pinball Effect: How Renaissance Water Gardens Made the Carburetor Possible - and Other Journeys. Boston: Back Bay Books, 1997.

(Note: ellipsis added.)




January 13, 2009

Inability to Patent Sulfa, Delayed Its Marketing


When new uses of old, unpatentable drugs are discovered, there seems to be inadequate incentive to publicize them, and bring them to market. (For example, I think I have seen research suggesting that aspirin and fish oil capsules, are as effective in fighting heart disease as some newer drugs, but are nonoptimally utilized because of perverse incentives.) Maybe a revision of the patent law should be considered that permits some patenting of new uses of old drugs and substances?

(p. 172) It was wonderful that this powerful, inexpensive medicine was now available, but for a year after the Pasteur Institute announcement, no one marketed it seriously in its pure form as a medicine. Because it was not patentable, it was difficult for major chemical or drug firms to see a way to make much of a profit from it. It was not until months after the Pasteur group's first publication on sulfa that the president of Rhône-Poulenc, an industrial supporter of Fourneau's laboratory, visited the Pasteur Institute to hear about it. After talking with the researchers he decided to launch Septazine, a variation on pure sulfa that he felt was different enough to allow patenting---and hence profits. Septazine reached the marketplace in May 1936.


Source:

Hager, Thomas. The Demon under the Microscope: From Battlefield Hospitals to Nazi Labs, One Doctor's Heroic Search for the World's First Miracle Drug. New York: Three Rivers Press, 2007.




January 9, 2009

French Entrepreneur Fourneau Was Against Law, But Used It


The existence and details of patent laws can matter for creating incentives for invention and innovation. The patent laws in Germany and France in the 1930s reduced the incentives for inventing new drugs.

(p. 141) German chemical patents were often small masterpieces of mumbo jumbo. It was a market necessity. Patents in Germany were issued to protect processes used to make a new chemical, not, as in America, the new chemical itself; German law protected the means, not the end.   . . .

. . .

(p. 166) Fourneau decided that if the French were going to compete, the nation's scientists would either have to discover their own new drugs and get them into production before the Germans could or find ways to make French versions of German compounds before the Germans had earned back their research and production costs---in other words, get French versions of new German drugs into the market before the Germans could lower their prices. French patent laws, like those in Germany, did not protect the final product. "I was always against the French law and I thought it was shocking that one could not patent one's invention," Fourneau said, "but the law was what it was, and there was no reasons not to use it."



Source:

Hager, Thomas. The Demon under the Microscope: From Battlefield Hospitals to Nazi Labs, One Doctor's Heroic Search for the World's First Miracle Drug. New York: Three Rivers Press, 2007.

(Note: ellipses added.)




January 7, 2009

In Geology, Economic Growth Caused Scientific Progress


(p. 130) . . . , the major problem inhibiting England's industrial development was the state of the roads. So the introduction of waterborne transportation on the new canals triggered massive economic expansion because these waterways transported coal (and other raw materials) much faster and cheaper than by packhorse or wagon. In 1793 a surveyor called William Smith was taking the first measurements in preparation for a canal that was to be built in the English county of Somerset, when he noticed something odd. (p. 131) Certain types of rock seemed to lie in levels that reappeared, from time to time, as the rock layer dipped below the surface and then re-emerged across a stretch of countryside. During a journey to the north of England (to collect more information about canal-construction techniques), Smith saw this phenomenon happening everywhere. There were obviously regular layers of rock beneath the surface which were revealed as strata where a cliff face of a valley cut into them. In 1796 Smith discovered that the same strata always had the same fossils embedded in them. In 1815, after ten years of work, he compiled all that he had learned about stratification in the first proper colored geological map, showing twenty-one sedimentary layers. Smith's map galvanized the world of fossil-hunting.


Source:

Burke, James. The Pinball Effect: How Renaissance Water Gardens Made the Carburetor Possible - and Other Journeys. Boston: Back Bay Books, 1997.

(Note: ellipsis added.)




January 3, 2009

Vulcanized Rubber Due to Serendipitous Entrepreneurial Alertness


(p. 46) The problem with rubber was that it wasn't a very versatile material. Macintosh found, for example, that in very hot weather his raincoats would "sweat," and in freezing conditions they would crack. The solution to this particular problem came, as ever with innovation, by accident. In 1839 a young American working in the Roxbury India Rubber Company in Roxbury, Massachusetts, was experimenting with his raw materials one day when he accidentally let a mixture of rubber and sulfur drop onto a hot stove. The next morning he saw that the rubber had charred, like leather, instead of melting. He correctly inferred that if he could stop the charring at the right point, he'd have rubber that might behave like waterproof leather. The sulfur had vulcanized (he coined the word) the rubber in such a way that it would retain its shape and elasticity over a wide range of temperatures. So now rubber could be hard or elastic, as required.


Source:

Burke, James. The Pinball Effect: How Renaissance Water Gardens Made the Carburetor Possible - and Other Journeys. Boston: Back Bay Books, 1997.

(Note: italics in original.)




January 1, 2009

Industrialist Duisberg Made Domagk's Sulfa Discovery Possible



(p. 65) . . . Domagk's future would be determined not only by his desire to stop disease but also by his own ambition, his family needs, and the plans of a small group of businessmen he had never met. He probably had heard of their leader, however, one of the preeminent figures in German business, a man the London Times would later eulogize as "the greatest industrialist the world has yet had." His name was Carl Duisberg.

Duisberg was a German version of Thomas Edison, Henry Ford, and John D. Rockefeller rolled into one. He had built an empire of science in Germany, leveraging the discoveries of dozens of chemists he employed into one of the most profitable businesses on earth. He knew how industrial science worked: He was himself a chemist. At least he had been long ago. Now, in the mid-1920s, in the twilight of his years, his fortunes made, his reputation assured, he often walked in his private park alone---still solidly built, with his shaved head and a bristling white mustache, still a commanding presence in his top hat and black overcoat---through acres of forest, fountains, classical statuary, around the pond in his full-scale Japanese garden by the lacquered teahouse, over his steams, and across his lawns.



Source:

Hager, Thomas. The Demon under the Microscope: From Battlefield Hospitals to Nazi Labs, One Doctor's Heroic Search for the World's First Miracle Drug. New York: Three Rivers Press, 2007.

(Note: ellipsis added.)





December 30, 2008

Supporters of Whaling Industry Objected to Light from Gas


In the process of creative destruction, the industry that is being destroyed often seeks to protect itself from the new innovation:

(p. 45) In England, objectors to gaslight argued that it undercut the whaling industry.


Source:

Burke, James. The Pinball Effect: How Renaissance Water Gardens Made the Carburetor Possible - and Other Journeys. Boston: Back Bay Books, 1997.




December 26, 2008

Eastman Was a Self-Financed Entrepreneur


Mark Casson has argued that the more original the entrepreneur's innovation, the more likely he will need to finance all, or a large part, of it himself. To the extent that this is true, it represents an important argument for allowing the accumulation of wealth (and thereby an argument against substantial personal income, and inheritance, taxes.)

Here is an example, consistent with Casson's argument, of a self-financed entrepreneur:

(p. 36) The idea of loading film into a camera, snapping the picture and then sending the film to a store to be processed was the brainchild of an American from Rochester, New York, called George Eastman. One day in 1879, at the bank where he had worked since leaving school at the age of fourteen, he didn't get the promotion he was expecting. So he left and used his savings to set himself up as a "Maker and Dealer in Photographic Supplies." At this time, picture taking was a messy, cumbersome and expensive business, involving glass-late negatives, buckets of chemicals an monster wooden cameras. When Eastman had finished his experiments with the process, his slogan promised, "You press the button. We do the rest."


Source:

Burke, James. The Pinball Effect: How Renaissance Water Gardens Made the Carburetor Possible - and Other Journeys. Boston: Back Bay Books, 1997.