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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.

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"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.")

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Rita 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.)

Source of book image: http://events.roundtable.com/iguru/DiscoveryDrivenGrowth.gif.

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"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.

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(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.)

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"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.)

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(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 our 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.

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.)

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"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.)

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(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.

Gilder, George. Microcosm: The Quantum Revolution in Economics and Technology. Paperback ed. New York: Touchstone, 1990.

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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."

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.)

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(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."

Gilder, George. Microcosm: The Quantum Revolution in Economics and Technology. Paperback ed. New York: Touchstone, 1990.

(Note: ellipsis added.)

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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.

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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

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(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.)

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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.)

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"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.)

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(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.

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"Electric cars are on the way from Mitsubishi, above, and Nissan, as the companies try to leapfrog Toyota." Source of photo and caption: online version of the NYT article quoted and cited below.

(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.)

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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.

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(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.)

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(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.)

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(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.

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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.)

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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.

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Source 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.)

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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.

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(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.

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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.)

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(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.)

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"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.

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(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.

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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.)

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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.

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(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.

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"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.

"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.

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(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.

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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.

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"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.

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"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.)

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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.)

"Nathan Myhrvold's message for tech firms: Pay up." Source of caption and photo: online version of the WSJ article quoted and cited above.

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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.

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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.)

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(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.)

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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.

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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.)

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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.)

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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.)

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(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.)

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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.

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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.)

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(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.)

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(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.)

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(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.)

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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.

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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.

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Source of book image: http://www.hachettebookgroup.com/_images/ISBNCovers/Covers_Enlarged/9780316116107_388X586.jpg

Like other James Burke books, The Pinball Effect is a good source of interesting and thought-provoking stories and examples, usually related to science and technology. One of his themes in the book is the importance of serendipity in making unanticipated connections.

My (and not Burkes') musings on serendipity:

Serendipity might be an example of Hayek's local knowledge, that the free market encourages the entrepreneur to take advantage of. Serendipity is an occurrence of one person in a particular time and place, with a mind prepared to be alert for it. As such it could not be planned by a central authority, and would usually be vetoed by a committee decision process. To maximally benefit from serendipity, we need a system that allows the motivated individual to pursue their discoveries.

Burke's musings on serendipity:

(p. 3) In every case, the journeys presented here follow unexpected paths, because that's how life happens. We strike out on a course only to find it altered by the action of another person, somewhere else in time and space. As a result, the world in which we live today is the end-product of millions of these kinds of serendipitous interactions, happening over thousands of years.

Source:

Burke, James. The Pinball Effect: How Renaissance Water Gardens Made the Carburetor Possible - and Other Journeys. Boston: Back Bay Books, 1997.

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"Investors renovated a terminal at Domodedovo and oversaw construction of a train line to Moscow." Source of caption and photo: online version of the WSJ article quoted and cited below.

(p. B9) MOSCOW -- A heated battle for passengers between the Russian capital's main airports offers an unlikely model of competition for the aviation industry.

In most cities, airports are monopolies. Even in cities that have more than one, including New York, Paris and Tokyo, airports are usually owned by the same operator. That means airlines can rarely make the kind of choices passengers take for granted, such as choosing an airport for its efficiency, shopping or lounges.

Not so in Moscow, where two international airports, Domodedovo and Sheremetyevo, owned by rival organizations, battle for business. The result is lower fees, better service and fast-improving facilities all around.

Domodedovo Airport, for example, recently convinced several top airlines to make it their Russian base, thanks to a major modernization that added more than 20 new restaurants, jewelry boutiques and a shop where passengers can rent DVDs to watch in booths.

Sheremetyevo Airport responded by building a fast rail link to Moscow, complete with a Starbucks at the airport station.

Moscow's airport rivalry highlights a paradox of the global aviation industry: Airlines compete fiercely with each other for customers, but they face many monopolist suppliers, such as air-traffic control systems, fuel distributors and airports. Resulting costs and poor services get passed on to travelers.

. . .

During Russia's privatization drive of the 1990s, local investors bought Domodedovo, which was previously Moscow's airport serving Soviet Central Asia. The investors, grouped into an upstart charter-airline operator, East Line Group, renovated a terminal at Domodedovo and oversaw construction of a train line to Moscow.

East Line charged airlines landing and operating fees that undercut Sheremetyevo by around 30%. For passengers, Domodedovo's rail link guaranteed a 40-minute trip to downtown Moscow. Private Russian carriers, largely frozen out of Aeroflot's base at Sheremetyevo, expanded quickly at the spacious Domodedovo.

East Line's big break came in 2003, when British Airways announced it would switch from Sheremetyevo to Domodedovo.

"The authorities were shocked that a major airline would leave the government airport," recalls Daniel Burkard, BA's former country manager for Russia.

For the full story, see:

DANIEL MICHAELS. "Moscow Points the Way With Airport Competition; While Most Nations Sport Monopolies, Rivalry Between Two Russian Gateways Ushers in Improvements for Carriers, Travelers." The Wall Street Journal (Mon., DECEMBER 1, 2008): B9.

(Note: ellipsis added.)

Source of graph: online version of the WSJ article quoted and cited above.

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"PRAYING FOR A MIRACLE.   S.U.V.'s sat on the altar of Greater Grace Temple, a Pentecostal church in Detroit, as congregants prayed to save the auto industry." Source of the caption and photo: online version of the NYT article quoted and cited below.

The process of creative destruction, requires that failed businesses be allowed to fail, so that the resources (labor and capital) devoted to the failed businesses, can be devoted to more productive uses.

The Danny DeVito character in "Other People's Money" makes this point in a speech near the end, in which he says that the Gregory Peck character has just delivered a "prayer for the dead" in calling for continued support for a dead business that is technologically obsolete.

On a more personal level, we have always bought cars from Honda and Toyota, because we sincerely believe that they build better cars than Detroit does. By what right does the government force taxpayers to prop up companies whose products have been rejected in the marketplace?

When the economic and moral arguments for bailout fail, all that is left for a failed industry is prayer (and politics)---one more reason to believe that the opportunity cost of prayer, is high.

(p. A19) DETROIT -- The Sunday service at Greater Grace Temple began with the Clark Sisters song "I'm Looking for a Miracle" and included a reading of this verse from the Book of Romans: "I consider that our present sufferings are not worth comparing with the glory that will be revealed in us."

Pentecostal Bishop Charles H. Ellis III, who shared the sanctuary's wide altar with three gleaming sport utility vehicles, closed his sermon by leading the choir and congregants in a boisterous rendition of the gospel singer Myrna Summers's "We're Gonna Make It" as hundreds of worshipers who work in the automotive industry -- union assemblers, executives, car salesmen -- gathered six deep around the altar to have their foreheads anointed with consecrated oil.

While Congress debated aid to the foundering Detroit automakers Sunday, many here whose future hinges on the decision turned to prayer.

Outside the Corpus Christi Catholic Church, a sign beckoned passers-by inside to hear about "God's bailout plan."

For the full story, see:

NICK BUNKLEY. "Detroit Churches Pray for 'God's Bailout'." The New York Times (Mon., December 8, 2008): A19.

(Note: The photo of the top appeared on p. A1 of the print edition of the December 8, 2008 NYT; also, the online version of the article has a date of Dec. 7 instead of the Dec. 8 date of the print version.)

"Worshipers at Greater Grace Temple, a Pentecostal church in Detroit, prayed on Sunday for an automobile industry miracle." Source of the caption and photo: online version of the NYT article quoted and cited above.

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I quoted a review of The Demon Under the Microscope in an entry from October 12, 2006. I finally managed to read the book, last month.

I don't always agree with Hager's interpretation of events, and his policy advice, but he writes well, and he has much to say of interest about how the first anti-bacterial antibiotic, sulfa, was developed.

In the coming weeks, I'll be highlighting a few key passages of special interest. In today's entry, below, Hager nicely summarizes the importance of the discovery of antibiotics for his (and my) baby boom generation.

(p. 3) I am part of that great demographic bulge, the World War II "Baby Boom" generation, which was the first in history to benefit from birth from the discovery of antibiotics. The impact of this discovery is difficult to overstate. If my parents came down with an ear infection as babies, they were treated with bed rest, painkillers, and sympathy. If I came down with an ear infection as a baby, I got antibiotics. If a cold turned into bronchitis, my parents got more bed rest and anxious vigilance; I got antibiotics. People in my parents' generation, as children, could and all too often did die from strep throats, infected cuts, scarlet fever, meningitis, pneumonia, or any number of infectious diseases. I and my classmates survived because of antibiotics. My parents as children, and their parents before them, lost friends and relatives, often at very early ages, to bacterial epidemics that swept through American cities every fall and winter, killing tens of thousands. The suddenness and inevitability of these epidemic deaths, facts of life before the 1930s, were for me historical curiosities, artifacts of another age. Antibiotics virtually eliminated them. In many cases, much-feared diseases of my grandparents' day---erysipelas, childbed fever, cellulitis---had become so rare they were nearly extinct. I never heard the names.

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.

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I've discussed in a previous entry, why The Long Tail is a worthy read. The article quoted below, praises a Harvard Business Review article that disagrees. I haven't had a chance to read the HBR article yet.

Yet on a fundamental level, I am confident that The Long Tail is right. New technologies such as Amazon and YouTube, reduce the cost of content diversity. If the supply curve of diversity moves right, then (ceteris paribus) the quantity of diverse content will increase. Hence, we can robustly expect more diverse content.

And for us free market libertarians, more choice is good.

(p. B5) The Long Tail theory, as explained by its creator, Wired magazine editor Chris Anderson, holds that society is "increasingly shifting away from a focus on a relatively small number of 'hits' (mainstream products and markets) at the head of the demand curve and toward a huge number of niches in the tail."

The reason involves the abundance of easy choice that the Web makes possible. A record store has room for only a set number of titles. ITunes, though, can link to all of the millions of songs that its servers can store. Thus, said Mr. Anderson, "narrowly-targeted goods and services can be as economically attractive as mainstream fare." Managers were urged to adopt their business plans accordingly.

Since appearing two years ago, the book has been something of a sacred text in Silicon Valley. Business plans that foresaw only modest commercial prospects for their products cited the Long Tail to justify themselves, as it had apparently proved that the Web allows a market for items besides super-hits. If you demurred, you were met with a look of pity and contempt, as though you had just admitted to still using a Kaypro.

That might now start to change, thanks to the article (online at tinyurl.com/3rg5gp), by Anita Elberse, a marketing professor at Harvard's business school who takes the same statistically rigorous approach to entertainment and cultural industries that sabermetricians do to baseball.

Prof. Elberse looked at data for online video rentals and song purchases, and discovered that the patterns by which people shop online are essentially the same as the ones from offline. Not only do hits and blockbusters remain every bit as important online, but the evidence suggests that the Web is actually causing their role to grow, not shrink.

Mr. Anderson responded on his Long Tail blog, thelongtail.com, saying much of the difference between his analysis and hers involved how hits and non-hits, or "head" and "tail" in the book's lingo, are measured. Aside from that, he was generous in praising the article, and said he welcomed the sort of rigorous scrutiny the theory was getting.

For the full commentary, see:

LEE GOMES. "PORTALS; Study Refutes Niche Theory Spawned by Web." The Wall Street Journal (Weds., JULY 2, 2008): B5.

The full information on The Long Tail, is:

Anderson, Chris. The Long Tail. New York: Hyperion, 2006.

The HBR article that is critical of the long tail, is:

Elberse, Anita. "Should You Invest in the Long Tail?" Harvard Business Review 86, no. 7/8 (2008): 88-96.

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"Steve Ballmer is the second Microsoft chief executive to butt his head against the view that a new era in technology brings a new market leader." Source of caption and photo: online version of the NYT article quoted and cited below.

(p. 4) The Yahoo affair obscures the larger story: Microsoft's long, long struggle -- since 1993 -- to maintain its leadership position while the Internet grew ubiquitous. Mr. Ballmer, who joined Microsoft in 1980 as its 15th employee, and Bill Gates, his mentor who will retire next month as a full-time Microsoft employee, have certainly tried their best to avert the inevitable decline of the company's influence.

In 2000, Mr. Ballmer credited Mr. Gates for noting that no company in the computer business had ever stayed on top through what Mr. Gates called "a major paradigm shift." The two men wanted Microsoft to be the first company to achieve that goal. An interesting challenge, but some problems are of a size that dwarf the abilities of multibillionaire mortals.

In a 1995 internal memo, "The Internet Tidal Wave," Mr. Gates alerted company employees to the Internet's potential to be a disruptive force. This was two years before Clayton M. Christensen, the Harvard Business School professor, published "The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail" (1997). The professor presented what would become a widely noted framework to explain how seemingly well-managed companies could do most everything to prepare for the arrival of disruptive new technology but still lose market leadership.

It's Google, of course, that has developed the musculature to step forward and lay claim to being Microsoft's successor as industry leader in the Internet era. If there had been any way Microsoft could have prepared for this day, it had ample time to do so. In 1993, fully five years before Google's founding and two years before Mr. Gates's memo, Nathan P. Myhrvold, then Microsoft's chief technology officer, wrote his own memo, "Road Kill on the Information Highway." It spelled out in prescient detail how each of many industries would be flattened by the build-out of digital networks, and it said that the PC software business would be no exception.

For the full commentary, see:

RANDALL STROSS. "Digital Domain; The Computer Industry Comes With Built-In Term Limits." The New York Times, SundayBusiness Section (Sun., May 18, 2008): 4.

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Source of graphic: online version of the NYT article quoted and cited below.

(p. C1) In recent years Palm lost its way. Its share of the smartphone market has been halved to about 16.9 percent over the last two years. First, Research in Motion found the sweet spot of business users with its BlackBerry. More recently, Apple grabbed consumers' fancy with the iPhone.

Palm has tried to innovate beyond the five-year-old Treo with little effect. It announced with great fanfare last year that it would build the Foleo, a cross between a smartphone and notebook computer, only to cancel the project three months later. While cellphone makers like Samsung, LG and R.I.M. brought out products to compete with the iPhone, Palm has told Treo loyalists and investors to be patient. They will need to be. Palm's stock price is down 90 percent since its high in March 2000.

Mr. Rubinstein, the executive chairman, said he is convinced he can bring Palm back. "Everyone is trying to make an iPhone killer," he said. "We are trying to make a killer Palm product."

For the full story, see:

LAURA M. HOLSON. "Palm, Once a Leader, Seeks Path in Smartphone Jungle." The New York Times (Weds., August 20, 2008): C1 & C5.

"Ed Colligan, left, Palm's chief executive, and Jon Rubinstein, the executive chairman, who was hired to revive the company." Source of caption and photo: online version of the NYT article quoted and cited above.

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James Burke writes well, and what he writes is often stimulating, and thought-provoking. On the other hand, some of what he writes is exasperating---he writes in sweeping generalities, and often his 'connections' are exaggerations, giving no weight (or even mention) to alternative, equally plausible accounts.

But on balance, I enjoy listening to him. Here is one of the bits I especially liked:

(p. 19) Because the rule of law exists, and above all because it encourages and protects acts of innovation with patent legislation, we in the modern world expect that tomorrow will be better than today. Our view of the universe is essentially optimistic because of the marriage between law and innovation. Law gives an individual the confidence to explore, to risk, to venture into the unknown, in the knowledge that he, as an innovator, will be protected by society.

Source:

Burke, James. The Day the Universe Changed: How Galileo's Telescope Changed the Truth and Other Events in History That Dramatically Altered Our Understanding of the World. Back Bay Books, 1995.

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Who will attempt to calculate the value conferred on mankind by the unknown inventor of the plough?

Source:

Say, Jean-Baptiste. A Treatise on Political Economy. Philadelphia: Lippincott, Grambo & Co., 1855; translator C. R. Prinsep, ed. Clement C. Biddle. Fourth-fifth edition.
First published: 1803, in French.

The quotation is from BOOK I, CHAPTER VI "Of Operations Alike Common To All Branches of Industry."

Full text is posted at: http://www.econlib.org/library/Say/sayT.html

(Note: Say is one of the earliest economists to recognize the importance of entrepreneurs. Today he is best know for his Say's Law. He lived from 1767-1832.)

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"The ball built to drop on New Year's Eve in Times Square included thousands of light-emitting diodes, or L.E.D.'s." Source of the caption and photo: online version of the NYT article quoted and cited below.

A few years ago I presented a paper at the meetings of Society for Social Studies of Science in which I mentioned Nordhaus's wonderful paper in which he measures advances in technology that produce illumination. Some of the technologies represent leapfrog advances that are part of Schumpeter's process of creative destruction.

At the end of my presentation, a member of the audience gave me a reference to the new L.E.D. light technology that he suggested was the next leapfrog advance. (Alas, I do not remember his name.)

(p. C3) L.E.D. bulbs, with their brighter light and longer life, have already replaced standard bulbs in many of the nation's traffic lights. Indeed, the red, green and yellow signals are -- aside from the tiny blinking red light on a DVD player, a cellphone or another electronic device -- probably the most familiar application of the technology.

But it is showing up in more prominent spots. The ball that descends in Times Square on New Year's Eve is illuminated with L.E.D.'s. And the managers of the Empire State Building are considering a proposal to light it with L.E.D. fixtures, which would allow them to remotely change the building's colors to one of millions of variations.

. . .

The problem, though, is the price. A standard 60-watt incandescent usually costs less than $1. An equivalent compact fluorescent is about $2. But in Europe this September, Philips, the Dutch company dealing in consumer electronics, health care machines and lighting, is to introduce the Ledino, its first L.E.D. replacement for a standard incandescent. Priced at $107 a bulb, it is unlikely to have more than a few takers.

"L.E.D. performance is there, but the price is not," said Kevin Dowling, a Philips Lighting vice president . . .

. . .

"The Marcus Center lighting will require no maintenance for 15 years," Mr. Gregory said. "That's a dream for a lighting designer."

But he does not expect standard bulbs to disappear totally. Just as the invention of the light bulb did not completely kill the candle and kerosene lamp markets, Mr. Gregory said, "there will always be a need for incandescent bulbs. They will never totally go away."

"The way an incandescent bulb plays on the face on a Broadway makeup mirror," he said, "you can never duplicate that."

For the full story, see:

ERIC A. TAUB. "Fans of L.E.D.'s Say This Bulb's Time Has Come." The New York Times (Mon., July 28, 2008): C3.

(Note: ellipses added.)

The reference to the Nordhaus paper is:

Nordhaus, William D. "Do Real-Output and Real-Wage Measures Capture Reality? The History of Light Suggests Not." In The Economics of New Goods, edited by Robert J. Gordon and Timothy F. Bresnahan, Chicago: University of Chicago Press for National Bureau of Economic Research, 1997, pp. 29-66.

"The full spectrum of color, design and programming available for the Times Square ball." Source of the caption and photo: online version of the NYT article quoted and cited above.

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Here is a significant claim from "an elderly Chinese professor" (p. 76) who was talking to Robert Payne in 1943. Payne was "a writer and teacher who befriended Needham in China." The passage is quoted in an entertaining new book by Simon Winchester.

(p. 77) ". . .; we invented an airplane, and quite rightly executed the inventor; . . . "

Source:

Winchester, Simon. The Man Who Loved China: The Fantastic Story of the Eccentric Scientist Who Unlocked the Mysteries of the Middle Kingdom. New York: HarperCollins Publishers, Inc., 2008.

Winchester does not document his source for the quote, but it is presumably one of these two books by Payne, that are listed in Winchester's bibliography:

Payne, Robert. Chinese Diaries 1941-1946. New York: Weybright and Talley, 1945.

Payne, Robert. Chungking Diary. London: Weybright and Talley, 1945.

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"Pratt & Whitney hopes its Geared Turbo Fan engine will defy skeptics and win it a spot on the next generation of jets from Boeing and Airbus." Source of the caption and photo: online version of the WSJ article quoted and cited below.

(p. B1) Once every 20 years or so, the companies that make jet engines battle it out for a chance to power the next generation of single-aisle airplanes.

. . .

General Electric Co. unveiled plans to develop a new family of engine cores that it said would vault it ahead of United Technologies Corp.'s Pratt & Whitney, which has a two-year head start on a novel engine that promises to burn 12% less fuel than today's best engines.

GE, which is working with French partner Safran SA, said its engine will have fewer moving parts than Pratt & Whitney's, and will deliver equal or better performance. "We've been pretty quiet for the last couple of years, but we've been doing plenty of work in secret," said GE Aviation President David Joyce, in an interview. "So be it. Game on."

. . .

Besides GE and Pratt & Whitney, the other major player in the industry is Britain's Rolls-Royce PLC. Hoping to dominate the market, all three companies plan to spend well over $1 billion on their new engines, stretching the limits of their technology. Developing fuel-efficient engines requires the use of exotic alloys and ceramic coatings that can cope with internal engine temperatures that would be above the melting points of untreated metal components.

The next generation of engines may look radically different from those used today. One design that GE and Rolls-Royce are exploring separately would have a double row of propellers at the (p. B3) back end of the engine, with no protective covering. Such an engine would be noisier and significantly slower than today's planes. It also would have to be mounted at the rear of the airplane, but the companies say it would consume as much as 24% less fuel.

. . .

Pratt & Whitney had hoped to get a boost in the engine race by promoting a design called the Geared Turbo Fan. It uses a gearbox at the front of the engine that allow various fans and compressors to turn at different speeds for greater efficiency and less noise. . . .

. . .

The company has been working on the gear technology for almost 20 years, investing almost $1 billion so far, Mr. Finger said. He said that in addition to fuel and emissions savings, the new engine will cut noise by a factor of two and reduce maintenance by 40% because it will have fewer moving parts throughout the engine.

For the full story, see:

J. LYNN LUNSFORD and DANIEL MICHAELS. "Jet-Engine Makers Launch New War; Billions of Dollars at Stake in Race To Develop Efficient Power Source For Next Wave of Boeing, Airbus Planes." The Wall Street Journal (Mon., July 14, 2008): B1 & B3.

(Note: ellipses added.)

"GE is creating an engine with fewer moving parts than Pratt & Whitney's design, and seeks to deliver equal or better performance." Source of the caption and photo: online version of the WSJ article quoted and cited above.

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"Hachette's audio department recently held a "funeral" for cassette tapes; an invitation is above." Source of caption and photo: online version of the NYT article quoted and cited below.

The article quoted below mentions a feature of new "leapfrog" technologies that has received too little attention. The new product, overall, for most purposes, or for most important purposes, is better than the old product, but it may be that the new product lacks some features that the old product had, that had value. It is a step forward in most respects, but not in all respects.

I salute the observation in the last quoted paragraph below. When I am listening to a book, while walking Willy, some UPS truck often passes me, noisily making a sentence of two inaudible. If I'm listening to a cassette, I can back up a few sentences. If I'm listening to a CD, I have to back up at least a few minutes, and often many minutes (depending on how short the tracks are on the CD).

I remember an early word processor (can't remember its name, maybe it was Wordmarc), that allowed you to type in the page number of a long document and then go directly to that page. I am currently writing a book using Microsoft Word. And in the vast majority of respects it is better than the word processor of yore. But every time I have to scroll and and scroll and scroll, to get to a page, when I already know exactly which page I want, I irrationally curse Bill Gates.

Addendum posted 10/10/08:

Since this post was created on July 30, 2008, I have discovered that Word 2007 has the feature that I missed from Wordmarc, and I also learned that if I had invested more time in Word 2003, I might have discovered that by drilling down to an obscure option menu, it too could have been customized to have had the feature. (In Wordmarc the feature was real obvious.)

(p. C7) There was a funeral the other day in the Midtown offices of Hachette, the book publisher, to mourn the passing of what it called a "dear friend." Nobody had actually died, except for a piece of technology, the cassette tape.

While the cassette was dumped long ago by the music industry, it has lived on among publishers of audio books. Many people prefer cassettes because they make it easy to pick up in the same place where the listener left off, or to rewind in case a certain sentence is missed. For Hachette, however, demand had slowed so much that it released its last book on cassette in June, with "Sail," a novel by James Patterson and Howard Roughan.

The funeral at Hachette -- an office party in the audio-book department -- mirrored the broader demise of cassettes, which gave vinyl a run for its money before being eclipsed by the compact disc. (The CD, too, is in rapid decline, thanks to Internet music stores, but that is a different story.)

. . .

Cassette tapes' tendency to hiss -- and to melt in the summer and snap in the winter -- turns off audiophiles. But for audio books, the cassette is an oddly elegant medium: you can eject it from your car, carry it home and stick it in a boombox, and it will pick up in the same place, an analog feat beyond the ability of the CD.

For the full story, see:

ANDREW ADAM NEWMAN. "Say So Long to an Old Companion: Cassette Tapes." The New York Times Company (Mon., July 28, 2008): C7.

(Note: ellipsis added.)

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"Making glass has long been energy-intensive, but soaring energy prices provide a strong incentive for that to change." Source of caption and photo: online version of the NYT article quoted and cited below.

(p. 4) Glassmaking is a based on old, stable technologies that require lots of materials and energy. The basic furnace, which melts sand into glass at extremely high temperatures, hasn't undergone a fundamental change since the 1850s. Furnace designers have long contented themselves with small improvements, such as using pure oxygen to improve energy efficiency.

Today, glassmaking faces a technological upheaval that offers a reminder that "it is a mistake to assume that older technologies are less dynamic than new ones," says David Edgerton, a historian at Imperial College in London and the author of "The Shock of the Old," a history of the evolution of pre-electronic technologies in the 20th century.

. . .

Mr. Greenman sees a new willingness to innovate among glassmakers who, until recently, usually shunned technological advances because savings in materials and energy didn't justify the costs of introducing new designs and processes.

"Many innovations were, frankly, thwarted by cost," says C. Philip Ross, a consultant in Laguna Niguel, Calif., who has studied technological options for the industry. "There's a lot of upside in revisiting old, discarded ideas."

Glassmakers are searching for both small and large advances on three fronts: designing more efficient furnaces; creating much stronger glass; and using heat better.

. . .

The potential revolution in glass-making suggests a new model for innovation: Creators go back to the future, spending almost as much time retrieving once-discarded inventions as they do creating new ones.

For the full story, see:

G. PASCAL ZACHARY. "Ping; Starting to Think Outside the Jar." The New York Times, SundayBusiness Section (Sun., June 15, 2008): 4.

(Note: ellipses added.)

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Using a Segway to deliver pizza. Source of photo: online version of the WSJ article quoted and cited below.

(p. B2) With gasoline prices and global warming on their minds, more Americans are getting out of their cars and riding to work -- and riding on the job -- on the once-maligned Segway.

Scott Hervey of Yorba Linda, Calif., bought one of the electric scooters on June 7 and has put 150 miles on it commuting to his custodian's job at Disneyland, about 12 miles away. He had considered buying a Segway for four years, and gasoline prices finally drove him to do it. Now he "glides," as Segway enthusiasts say, to work. "I like passing gas stations," says the 54-year-old.

The two-wheeled Segway, a self-balancing vehicle that runs on a rechargeable battery, debuted amid massive hype in 2001. Tech icons like Steve Jobs, Apple Inc.'s chief executive officer, and Amazon.com Inc. CEO Jeff Bezos predicted it would change the way people lived. But critics panned the high-tech scooter for its $5,000 price tag and portrayed it as a toy for geeks and the rich. Some cities banned it from sidewalks because of safety concerns.

Today, the Segway is gaining converts. It plugs into a standard electrical outlet and can get up to 25 miles per charge.

Sales at the scooter's maker, Segway Inc., have risen to an all-time high, says CEO Jim Norrod. The closely held Manchester, N.H., company doesn't release detailed numbers. (A September 2006 recall showed the company had sold 23,500 Segways.) But Mr. Norrod says he expects sales this quarter to jump 50% from a year earlier, versus a 25% year-over-year increase in the first quarter.

For the full story, see:

STU WOO. "Segway Glides as Gasoline Jumps; Maligned Scooter Winning New Fans; $5,000 Price Tag." The Wall Street Journal (Mon., June 16, 2008): B2.

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

(p. C1) The salad days of organic salad are wilting in favor of high-tech tomatoes.

As global food shortages threaten to ignite social and economic instability from Nigeria to India, the popular aversion to genetically modified foods is turning into more of a luxury for the wealthy than a practical option for the masses.

This trend is evident in the share price and earnings growth of Monsanto, the world leader in agricultural biotechnology by market share. Its stock has soared 22% this year, trading at a breathless 37 times estimated 2008 per-share earnings.

For the full story, see:

KAREN RICHARDSON. "AHEAD OF THE TAPE; Food Shortage Recasts Image of 'Organic'." The Wall Street Journal (Weds., June 25, 2008): C1.

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

(p. B7) One day during Trip Adler's sophomore year at Harvard University, he saw fellow undergraduates Mark Zuckerberg and Dustin Moskovitz outside their dormitory with suitcases and boxes. When Mr. Adler asked what the two -- who happened to be Facebook Inc.'s co-founders -- were doing, Mr. Moskovitz lightly replied that they were moving from Cambridge, Mass., to Silicon Valley "to make Facebook big."

"I was so jealous," recalls Mr.Adler, now 23 years old. "I thought, 'I've got to find an idea and drop out of Harvard.'"

Mr. Adler didn't leave school, but after graduating in 2006, he did start an online document-sharing company. San Francisco-based Scribd Inc., employs 12 people and attracts 11.1 million monthly visitors, according to Web-tracking company comScore Inc. It has raised nearly $3.9 million from Redpoint Ventures and other venture-capital and individual investors.

Mr. Adler is just one of the Harvard students who have caught start-up fever since Facebook, founded when Mr. Zuckerberg was at Harvard in 2004, exploded in popularity. Other recent Harvard-born start-ups include Internet companies Kirkland North Inc., Drop.io Inc. and Labmeeting Inc. And Facebook has become a model for these start-ups on many fronts, from the look of company Web sites to their corporate strategies.

For the full story, see:

VAUHINI VARA. "ENTERPRISE; Facebook Ignites Entrepreneurial Spirit at Harvard Students, Graduates Start Firms, Using The Site as a Model." The Wall Street Journal (Tues., May 20, 2008): B7.

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Source of book image:
http://bp2.blogger.com/_Sar8IPNlxOY/SClPS33oTxI/AAAAAAAAB_0/B8GjajHtetY/s1600/PixarTouch.jpg

(p. A19) One of Mr. Catmull's other inspirations was to hire computer animator John Lasseter after he was fired by Walt Disney Co. in 1983. (He had apparently stepped on one too many toes in the company's sprawling management structure.) Then again, as Mr. Price reports, in the world of computer animators, workplace comings and goings seemed to be part of the job. Mr. Lasseter himself had already quit Disney and then returned before being fired. In the creative ferment of computer animation in the late 1970s and early 1980s, what mattered most was the work itself: Never mind who signs the paychecks - what project are you working on now?

. . .

One of Pixar's first projects revealed a truth that would point the way to success: Storytelling is more important than graphics firepower. The company created a short film, directed by Mr. Lasseter, called "Tin Toy," about a mechanical one-man band fleeing the terrors of a baby who wants to play with it. "Tin Toy" made audiences laugh in part because it turned established themes on their heads. The story was told from the toy's-eye view, close to the floor. The baby, doing what babies do, seemed like a gigantic, capricious monster. "Tin Toy" won the 1988 Academy Award for animated short film.

The upside-down "Tin Toy" point of view seems to fit much of what happened at Pixar afterward. The company made a deal with Disney in 1991: The little animation outfit would produce three movies, and the entertainment behemoth would distribute and market them. With the outsize success of the first movie in the deal, "Toy Story" - it grossed $355 million world-wide - Pixar and Disney were perhaps on an inevitable collision course over control and profits. Mr. Price adroitly depicts the clashes between Mr. Jobs and his nemesis at Disney, chief executive Michael Eisner, and captures the sweet vindication of Mr. Lasseter as the projects he guides outstrip the animation efforts of his former employer.

The sweetest moment in the Pixar saga came two years ago, when Disney bought the company for $7.4 billion in an all-stock deal - one that gave Pixar executives enormous power at their new home. Mr. Jobs sits on the Disney board and is the company's largest shareholder. (Mr. Eisner left in 2005.) And Mr. Lasseter became the chief creative officer for the combined Disney and Pixar animation studios, where Mr. Catmull serves as president.

The day after the sale was announced, Mr. Lasseter and Mr. Catmull flew to Burbank, Calif., to address a crowd of about 500 animation staffers on a Disney soundstage. "Applause built as they made their way to the front," Mr. Price reports, "and then erupted again in force" when the two men were introduced. "Lasseter was welcomed as a rescuer of the studio from which he had been fired some twenty-two years before." In one of their first moves, Mr. Price says, Messrs. Lasseter and Catmull "brought back a handful of Disney animation standouts who had only recently been laid off." Redemption, after all, is essential to any story well told.

For the full review, see:

PAUL BOUTIN. "Bookshelf, An Industry Gets Animated." The Wall Street Journal (Weds., May 14, 2008): A19.

(Note: ellipsis added.)

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"Campaigning Monday in Fresno, Calif., Senator John McCain said, if elected, he would offer $300 million to anyone who could build a more efficient car battery." Source of caption and photo: online version of the NYT article quoted and cited below.

(p. A15) FRESNO, Calif. -- In the 18th century the British offered a £20,000 prize to anyone who figured out how to calculate longitude. More recently, Netflix offered a million dollars for improving movie recommendations on its Web site. Now Senator John McCain is suggesting a new national prize: He said here Monday that if elected president he would offer $300 million to anyone who could build a better car battery.

. . .

"I further propose we inspire the ingenuity and resolve of the American people," Mr. McCain said, "by offering a $300 million prize for the development of a battery package that has the size, capacity, cost and power to leapfrog the commercially available plug-in hybrids or electric cars."

He said the winner should deliver power at 30 percent of current costs. "That's one dollar, one dollar, for every man, woman and child in the U.S. -- a small price to pay for helping to break the back of our oil dependency," he said.

For the full story, see:

MICHAEL COOPER. "McCain Proposes a $300 Million Prize for a Next-Generation Car Battery." The New York Times (Tues., June 24, 2008): A15 & A20.

(Note: ellipsis added.)

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Source of book image: http://creativecapital.wordpress.com/category/how-to-buy-creative-capital/

Doriot taught at Harvard during the whole time that Joseph Schumpeter taught at Harvard. Given that their interests apparently overlapped, it is surprising that there are no references to Schumpeter or to "creative destruction" in Ante's book.

There are also no references to Doriot in McCraw's recent comprehensive intellectual biography of Schumpeter.

(Scherer in his essay "An Accidental Schumpeterian" mentions taking a useful course from Doriot, but does not illuminate the relationship, if any, between Doriot and Schumpeter.)

(p. A17) Before Sand Hill Road near Stanford University became the center of the venture-capital universe - before Google and Pets.com - the modern market for financing risky startup companies took shape far from Silicon Valley in the years after World War II.

ARD was the first to raise what was then known as "risk capital" from outsiders at a time when investors' wounds were still fresh from the stock-market crash of 1929 and the Depression of the 1930s. The high failure rate of start-ups had generally precluded raising money from average investors. And so ARD's chief competitors in the postwar years were the Rockefellers and another old-money operation, J.H. Whitney & Co.

. . .

The company would hardly merit attention except for its one grand slam, Digital Equipment Corp., which helped establish the East Coast high-tech stronghold along Route 128 outside Boston.

Digital, a minicomputer maker co-founded by former Massachusetts Institute of Technology engineer Ken Olsen, received $70,000 from ARD in 1957 in return for a 70% stake, which eventually grew in value to hundreds of millions of dollars. Mr. Ante calculates the investment's return at 70,000%.

. . .

Doriot, who taught at Harvard for 40 years, beginning in 1926, offered a popular class that was ostensibly about manufacturing but was more a seminar in his business philosophy. "He stressed common sense themes such as self-improvement, teamwork, and contributing to society," Mr. Ante writes. Doriot was known for "spicing up his philosophy with practical and pithy words of advice." Among them: "Always remember that someone somewhere is making a product that will make your product obsolete."

For the full review, see:

RANDALL SMITH. "Bookshelf; Money to Make Things New." The Wall Street Journal (Weds., May 21, 2008): A17.

(Note: ellipses added.)

Reference to the biography of Doriot:

Ante, Spencer E. Creative Capital: Georges Doriot and the Birth of Venture Capital. Boston: Harvard Business School Press, 2008.

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"Steven J. Sasson, an electrical engineer, created the first digital camera." Source of caption and photo: online version of the NYT article quoted and cited below.

Kodak's problems in detailed in the article below, fit very well Christensen's account about how difficult it is for incumbent firms to embrace major disruptive technologies.

(p. C1) ROCHESTER -- Steven J. Sasson, an electrical engineer who invented the first digital camera at Eastman Kodak in the 1970s, remembers well management's dismay at his feat.

"My prototype was big as a toaster, but the technical people loved it," Mr. Sasson said. "But it was filmless photography, so management's reaction was, 'that's cute -- but don't tell anyone about it.' "

. . .

(p. C2) The company now has digital techniques that can remove scratches and otherwise enhance old movies. It has found more efficient ways to make O.L.E.D.'s -- organic light-emitting diodes -- for displays in cameras, cellphones and televisions.

This month, Kodak will introduce Stream, a continuous inkjet printer that can churn out customized items like bill inserts at extremely high speeds. It is working on ways to capture and project three-dimensional movies.

. . .

Paradoxically, many of the new products are based on work Kodak began, but abandoned, years ago. The precursor technology to Stream, for example, pushed ink through a single nozzle. Stream has thousands of holes and uses a method called air deflection to separate drops of ink and control the speed and order in which they are deposited on a page.

"I remember wandering through the labs in 2003, and seeing the theoretical model that could become Stream," said Philip J. Faraci, Kodak's president. "The technology was half-baked, but it was a real breakthrough."

Other digital technologies languished as well, said Bill Lloyd, the chief technology officer. "I've been here five years, and I'm still learning about all the things they already have," he said. "It seems Kodak had developed antibodies against anything that might compete with film."

It took what many analysts say was a near-death experience to change that. Kodak, a film titan in the 20th century, entered the next one in danger of being mowed down by the digital juggernaut. Electronics companies like Sony were siphoning away the photography market, while giants like Hewlett-Packard and Xerox had a lock on printers.

"This was a supertanker that came close to capsizing," said Timothy M. Ghriskey, chief investment officer at Solaris Asset Management, which long ago sold its Kodak shares.

For the full story, see:

CLAUDIA H. DEUTSCH. "At Kodak, Some Old Things Are New Again." The New York Times (Fri., May 2, 2008): C1-C2.

(Note: ellipses added.)

"Allan Camp, a technician at Kodak's inkjet development center in Rochester, works on the development of print heads for printers." Source of caption and photo: online version of the NYT article quoted and cited above.

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Source of book image: http://press.princeton.edu/images/k8618.gif

(p. A13) The space shuttle Discovery arrived safely home over the weekend, and I suppose we are all rather relieved - that is, those of us who were aware that the shuttle had blasted off a couple of weeks ago on yet another mission. Space exploration is attracting a lot of excitement these days, but the excitement seems to have less to do with the shuttle and more to do with private space ventures, like Richard Branson's Virgin Galactic or Robert Bigelow's plans for space hotels or Space Adventures Ltd., whose latest customer for a private space trip is Google co-founder Sergey Brin. He bought a ticket only last week.

Robert Zimmerman's "The Universe in the Mirror" serves to remind us that NASA, too, can do exciting things in space. Yet the career of the Hubble Space Telescope has been both triumphant and troubled, bringing into focus the strengths and the weaknesses of doing things the NASA way.

. . .

In addition to telling a thrilling tale, Mr. Zimmerman provides a number of lessons. One, he says, is the importance of having human beings in space: Had Hubble not been designed for servicing by astronauts, it would have been an epic failure and a disaster for a generation of astronomers and astrophysicists. Though robots have their uses, he notes, "humans can fix things, something no unmanned probe can do." . . .

But the biggest lesson of "The Universe in a Mirror" comes from the utterly dysfunctional funding and management system that Mr. Zimmerman portrays. Hubble was a triumph, but a system that requires people to sacrifice careers and personal lives, and to engage in "courageous and illegal" acts, in order to see it succeed is a system that is badly in need of repair. Alas, fixing Hubble turned out to be easier than fixing the system that lay behind its problems.

For the full review, see:

GLENN HARLAN REYNOLDS. "Bookshelf; We Can See Clearly Now." The Wall Street Journal (Mon., June 16, 2008): A13.

(Note: ellipses added.)

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

Apparently the WSJ's new owner, Rupert Murdoch, has not yet succeeded in killing the wonderful, quirky, inimitable front page, center column, articles that are part of what makes the WSJ great:

(p. A1) CHANDLER, Ariz. -- Jerry Knoblach wants to bring wireless service to millions of rural Americans. His plan: Beam it down from balloons hovering at the edge of space.

This isn't just hot air. His company, Space Data Corp., already launches 10 balloons a day across the Southern U.S., providing specialized telecom services to truckers and oil companies. His balloons soar 20 miles into the stratosphere, each carrying a shoebox-size payload of electronics that acts like a mini cellphone "tower" covering thousands of square miles below.

His idea has caught the eye of Google Inc., according to people familiar with the matter. The Internet giant -- which is now pushing into wireless services -- has considered contracting with Space Data or even buying the firm, according to one person.

. . .

Maintaining a telecom system based on gas-filled bladders floating in the sky requires some creativity. The inexpensive bal-(p. A9)loons are good for only 24 hours or so before ultimately bursting in the thin air of the upper atmosphere. The electronic gear they carry, encased in a small Styrofoam box, then drifts gently back to earth on tiny parachutes.

This means Space Data must constantly send up new balloons. To do that, it hires mechanics employed at small airports across the South. It also hires farmers -- particularly, dairy farmers.

They're "very reliable people," says Mr. Knoblach. They have to "milk the cows 24-7, 365 days a year, so they're great people to use as a launch crew." Space Data pays them $50 per launch.

For the full story, see:

AMOL SHARMA "Floating a New Idea For Going Wireless, Parachute Included; Balloon Launch Gets Google's Attention; Dairy Farmers Can Help." The Wall Street Journal (Weds., February 20, 2008): A1 & A9.

(Note: ellipsis added.)

"A balloon being launched in Piedmont, Oklahoma." Source of image: online version of the WSJ article quoted and cited above.

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"A Monsanto researcher, Mohammadreza Ghaffarzadeh, monitored drought-resistant corn technology in Davis, Calif." Source of caption and photo: online version of the NYT article quoted and cited below.

(p. 4) CORN prices are at record high levels. Costs for other agricultural essentials, from wheat to coffee to rice, have surged, too. And many people are stunned, even frightened, by all the increases.

But some entrepreneurs and analysts -- recognizing that relative price increases in specific goods always encourage innovators to find ways around the problem -- say they see an opportunity for creative solutions.

"When something becomes dear, you invent around it as much as you can," says David Warsh, editor of Economicprincipals.com, a newsletter on trends in economic thinking.

Joel Mokyr, an economic historian at Northwestern University, adds, "All of a sudden, some things that didn't look profitable now do."

. . .

A study in the 1950s by the economist Zvi Griliches of American farmers' adoption of more productive varieties of corn showed how higher prices reduced the cost of adopting new technologies.

. . .

Ultimately, higher food prices give innovators room to cover the cost of protecting human health. But prices are a democratic signal: when all innovators see them, their ability to sneak up on an opportunity, while others nap, vanishes.

"The bigger the prize people are chasing, the more people go after it," says Paul Romer, a theorist on sources of economic growth. "As people pile into an area, the expected return to any one innovator goes down."

Yet, fortunately, the return to society goes up.

For the full commentary, see:

G. PASCAL ZACHARY. "Ping; A Brighter Side of High Prices." The New York Times, SundayBusiness Section (Sun., May 18, 2008): 4.

(Note: ellipses added.)

For more on Zvi Griliches's contributions to the economics of innovation, see:

Diamond, Arthur M., Jr. "Zvi Griliches's Contributions to the Economics of Technology and Growth." Economics of Innovation and New Technology 13, no. 4 (June 2004): 365-397.

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(p. C3) The United States may be synonymous with the high-tech revolution, but it is in danger of losing its high-tech edge, according to Cybercities 2008, a report released Tuesday by AeA, a technology industry trade association.

Because the federal government does not issue a sufficient number of green cards or work visas to talented foreign students studying here, there are a "tremendous number of unfilled jobs," said Christopher Hansen, AeA's chief executive.

"We educate them and then tell them to go home. This is absurd," said Mr. Hansen, whose group has lobbied to increase the number of visas for foreign technology industry workers.

For the full story, see:

ERIC A. TAUB. "U.S. High Tech Said to Slip." The New York Times (Weds., June 25, 2008): C3.

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I agree with the Karl Rove's analysis below, that John McCain does not exhibit much understanding of Schumpeter's process of creative destruction. On the other hand, I have seen no evidence that Barack Obama has any such understanding either. (Nor have I seen any evidence that Rove's former boss, George W. Bush, has any such understanding, for that matter.)

And, in general, I am still of the belief that, overall, between the two of them, McCain will put fewer obstacles in the path of innovation than will Obama.

(p. A13) This past Thursday, Mr. McCain came close to advocating a form of industrial policy, saying, "I'm very angry, frankly, at the oil companies not only because of the obscene profits they've made, but their failure to invest in alternate energy."

But oil and gas companies report that they have invested heavily in alternative energy. Out of the $46 billion spent researching alternative energy in North America from 2000 to 2005, $12 billion came from oil and gas companies, making the industry one of the nation's largest backers of wind and solar power, biofuels, lithium-ion batteries and fuel-cell technology.

Such investments, however, are not as important as money spent on technologies that help find and extract more oil. Because oil companies invested in innovation and technology, they are now tapping reserves that were formerly thought to be unrecoverable. Maybe we are all better off when oil companies invest in what they know, not what they don't.

And do we really want the government deciding how profits should be invested? If so, should Microsoft be forced to invest in Linux-based software or McDonald's in weight-loss research?

Mr. McCain's angry statement shows a lack of understanding of the insights of Joseph Schumpeter, the 20th century economist who explained that capitalism is inherently unstable because a "perennial gale of creative destruction" is brought on by entrepreneurs who create new goods, markets and processes. The entrepreneur is "the pivot on which everything turns," Schumpeter argued, and "proceeds by competitively destroying old businesses."

Most dramatic change comes from new businesses, not old ones. Buggy whip makers did not create the auto industry. Railroads didn't create the airplane. Even when established industries help create new ones, old-line firms are often not as nimble as new ones. IBM helped give rise to personal computers, but didn't see the importance of software and ceded that part of the business to young upstarts who founded Microsoft.

So why should Mr. McCain expect oil and gas companies to lead the way in developing alternative energy? As with past technological change, new enterprises will likely be the drivers of alternative energy innovation.

For the full story, see:

KARL ROVE. "Obama and McCain Spout Economic Nonsense." The Wall Street Journal (Thurs., June 19, 2008): A13.

(Note: I thank John Pagin and Dagny Diamond for alerting me to Rove's discussion of Schumpeter.)

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Caricature of Glenn Britt. Source of caricature: online version of the WSJ article quoted and cited below.

(p. B2) WSJ: You invested $550 million in Clearwire Corp., which is building a wireless broadband network. Why?

Mr. Britt: We saw that as a defensive move. The business today is largely about making voice telephone calls, text messaging, and some data.

This venture is about very fast broadband delivery, but the technologies and the products are as yet not fully defined. It's a bit of a start-up, leap-of-faith kind of thing.

WSJ: What uses could this wireless network be put to?

Mr. Britt: An obvious one is using your laptop in a portable way just as you might today with WiFi hot spots. Another is going to be the PDA, the smallest device you can use to access the Internet. If you have an iPhone you can start seeing what that might look like with a more robust network.

Out in the future, people are talking about machine-to-machine communication, the idea of heart monitors talking to hospitals, your camera automatically uploading photos to Shutterfly or whatever printing service you might use.

WSJ: What about the idea of mobile video delivered to portable devices?

Mr. Britt: I know people talk a lot about mobile video, and I certainly think there is some application for it. But I quite honestly haven't seen it as a big deal. People do want to get video wherever they are. We already have a robust over-the-air television system which, as it goes digital, will be able to have a mobile component to it. But I don't know how big the ultimate market is in this country. I'm skeptical.

For the full story, see:

VISHESH KUMAR. "BOSS TALK; Cable Boss Airs Growth Plans; Time Warner Cable CEO Sees New Freedoms, Threats After Its Spinoff." The Wall Street Journal (Mon., June 2, 2008): B1-B2.

(Note: the title of the online version of the article is "BOSS TALK; Grappling With Cable's Future; Time Warner's Glenn Britt Sees Freedoms, Threats As Unit Readies for Spinoff.")

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

(p. A23) . . . the impact of our technological innovation has helped lift untold numbers out of poverty.

This technology has created massive amounts of change. Like the Industrial Revolution before it, the current transformation is anything but pain-free. It's what Joseph Schumpeter called creative destruction. Google, Craigslist and Microsoft have been prospering. General Motors, United Airlines and the New York Times have not. In the midst of layoffs in the newsroom, it's hard to see anything good happening in the rest of the economy.

For the full commentary, see

BRIAN WESBURY. "Change We Can Believe In Is All Around Us." The Wall Street Journal (Weds., June 11, 2008): A23.

(Note: ellipsis added.)

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In the book The Genome War, the story is told about how the leading theorist proved the impossibility of the gene sequencing technique. It was the Venter group that gave it a try and proved it could work. This story is similar to the one about theory saying that what Marconi was trying, was impossible. (See: Larson, 2006.)

Rosenberg and Birdzell (1986) discuss the case that theory had proven how solid objects fall. But Galileo's experiments proved them wrong. This established the primacy of experiment and evidence, over theory.

When governments decide, they usually do what is safe, which is to follow current theory (or in rare cases, they pick Lysenko).

The entrepreneurial system, takes advantage of the tacit individual knowledge that is out there, but not yet theoretically defensible, and allows it to percolate to success.

References:

Larson, Erik. Thunderstruck. New York: Crown, 2006.

Rosenberg, Nathan, and L.E. Birdzell, Jr. How the West Grew Rich: The Economic Transformation of the Industrial World. New York: Basic Books, 1986.

Shreeve, James. The Genome War: How Craig Venter Tried to Capture the Code of Life and Save the World. 1st ed. New York: Alfred A. Knopf, 2004.

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Source of book image: http://www.genomenewsnetwork.org/articles/2004/02/20/genome_war.php

The race to decode the genome always seemed like an appealing test case of the relative efficiency of government versus private enterprise. But the results seem muddy because sometimes in the media the outcome has been described as a win for Craig Venter's private Celera corporation, and other times, as a tie.

For years I have wanted to learn more, and now I have finally done so by reading James Shreeve's fascinating The Genome War.

It is clear from the book that the entrance of Celera, greatly accelerated the government's own efforts to sequence the human genome. So one important lesson is that, no matter who "won the race, the consumer benefited from the entrance of a private competitor.

Also clear, is that Venter's group took advantage of public resources and results. Their primary zeal was for sequencing the genome, rather than for promoting private enterprise.

Regrettably, this is a common case: many entrepreneurs take the institutions of their economy as given, and make use of government when it suits their short-run objectives.

Officially the results were announced as a tie. But the main bone of contention had been over Celera's advocacy and use of the "whole genome shotgun" technique for sequencing the gene. The government group had attacked the method as impractical and unreliable.

The proof of who "won" in a deeper sense, was that after the contest was over, everyone, including the government, was using the "whole genome shotgun" technique.

Another lesson is that the usual scientific goal of immediately releasing findings, may actually reduce the information available to the public. If, as with the genome, the information is costly to obtain, allowing a period of proprietary ownership of the information, provides private entrepreneurs with the incentive to discover the information in the first place. Another case of unintended consequences: if we fully follow the alleged idealism of academic scientists, we will end up with less scientific knowledge, not more.

Reference to book:

Shreeve, James. The Genome War: How Craig Venter Tried to Capture the Code of Life and Save the World. 1st ed. New York: Alfred A. Knopf, 2004.

(Note: My comments are based on the whole book. A paragraph on pp. 366-367 is especially important.)

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(p. 258) It is entirely safe to generalize: innovation is more likely to occur in a society that is open to the formation of new enterprises than in a society that relies on its existing organizations for innovation.

Source:

Rosenberg, Nathan, and L.E. Birdzell, Jr. How the West Grew Rich: The Economic Transformation of the Industrial World. New York: Basic Books, 1986.

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The dry wit of Rosenberg and Birdzell is illustrated in this justified jab at the idea that technology can be centrally planned:

(p. 258) The advantage of having proposals for innovations considered by many decision centers is illustrated by the microcomputer, which was not undertaken by any of the leading American computer manufacturers, nor by the Soviet Union, nor by the French Commissariat du Plan, nor by MITI in Japan, but which has nevertheless proved widely useful.

Source:

Rosenberg, Nathan, and L.E. Birdzell, Jr. How the West Grew Rich: The Economic Transformation of the Industrial World. New York: Basic Books, 1986.

(Note: italics in original.)

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The following passage provides some evidence of the importance of information from science (viz., chemistry) in process improvement. Speaking of chemists:

(p. 247) . . ., with their aid, the life of a rail increased from two years to ten, and the car weight it could bear from eight tons to seventy in the forty years between the Civil War and 1905. Only a very few new technologies have had equal significance.

Source:

Rosenberg, Nathan, and L.E. Birdzell, Jr. How the West Grew Rich: The Economic Transformation of the Industrial World. New York: Basic Books, 1986.

(Note: ellipsis added.)

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(p. 246) We found . . . a learned German, Dr. Fricke, and great secrets did the doctor open up to us. [Ore] from mines that had a high reputation was now found to contain ten, fifteen, and even twenty per cent less iron than it had been credited with. Mines that hitherto had a poor reputation we found to be now yielding superior ore. The good was bad and the bad was good, and everything was topsy-turvy. Nine-tenths of all the uncertainties of pig iron making were dispelled under the burning sun of chemical knowledge.

What fools we had been! But there was this consolation: we were not as great fools as our competitors . . . Years after we had taken chemistry to guide (p. 247) us [they] said they could not afford to employ a chemist. Had they known the truth then, they would have known they could not afford to be without one.

Andrew Carnegie as quoted in:

Rosenberg, Nathan, and L.E. Birdzell, Jr. How the West Grew Rich: The Economic Transformation of the Industrial World. New York: Basic Books, 1986.

(Note: brackets and ellipses were in the original.)

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"Modern construction, Difference Engine No. 2, 2005"   Source of caption and photo: http://www.computerhistory.org/babbage/overview/

Charles Babbage is best known as the inventor of an early computer, but he also made some early, stimulating contributions to the economics of science.

(p. C6) The oldest computer has landed in Silicon Valley, where they design the newest computers.

The Science Museum in London has built two replicas from Charles Babbage's original design for the Difference Engine No. 2. Planned from 1847 to 1849, the five-ton, 8,000-part system for calculating the mathematical expressions known as polynomials was finally built in 2002 by a team of engineers that took 17 years to complete the entire project. The machine includes a remarkable printing component that almost certainly would have been the world's first automated typesetter had Babbage built one from his original design during his lifetime.

The all-mechanical Difference Engine can handle numbers to 31 digits of accuracy. The printer produces an ink printout but also has the capability of making a mold for a printing plate. It automatically typesets results in columns and employs two separate font sizes.

For the full story, see:

JOHN MARKOFF. "BITS; 1800s-Style Computer Comes to U.S." The New York Times (Mon., May 5, 2008): C6.

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Levy and Murnane show that the computer has, on average, benefitted the situation of labor. After I presented a similar example at the Summer Institute in 2007, Dave Mitch asked me if this was in general true of advances in technology, or if it might be an exceptional case.

If computers represent one example of creative destruction, another example, in the process variety, would be the advent of factory production. In the following passage, Rosenberg and Birdzell suggest that factories also benefitted the situation of labor:

The low wages, long hours, and oppressive discipline of the early factories are shocking in that the willingness of the inarticulate poor to work on such terms bespeaks, more forcefully than the most eloquent words, the even more abysmal character of the alternatives they had endured in the past. But this was not the way the romantics of the nineteenth century read the message of the factories. (R & B 1986, p. 173)

In the above passage, Rosenberg and Birdzell suggest that the abysmal alternatives to factory work, that the poor faced, may partly have been the result of the enclosure movement having worsened the situation of the lowest agricultural workers, by denying them access to the fallow lands for animal grazing. But, in the passage below, they also imply that to some extent it may just have been due to the secularly persistent suffering that had long characterized much rural life.

Neither the entrepreneurs who built the factories nor anyone else supposed that they were engaged in a work of charity or an exercise of social conscience. But whatever the moral quality of their intentions, their actions advanced the interests of a down-trodden subproletariat---a subproletariat in part, perhaps, characteristic of pre-industrial societies and, in part, drawn from an agricultural work force hard pressed by the enclosure movement and a high rate of growth in agricultural productivity. (R & B 1986, p. 174)

They further point out that, although everyone was supposed to be compensated for losses from enclosure, the interests of the poorest were not well-represented in the decision-making bodies:

In theory, the acts compensated the cottagers for the loss of their common rights by giving them some of the enclosed land. But the cottagers were not effectively represented in Parliament, and there is much reason to believe that the compensation was in practice inadequate. (R & B 1986, p. 171)

DeLong and Summers note enclosure as one of the major institutional/policy actions that enabled a past episode of creative destruction to create a past 'new economy.' But the fact (if it is a fact) that a majority of farm labor was hurt by the enclosure, does not imply that this had to have been the case. It may in fact illustrate one of the major pints of DeLong and Summers, namely that it is extremely important to try to get institutions and policies right.

Sources mentioned above:

DeLong, J. Bradford, and Lawrence H. Summers. "The "New Economy": Background, Questions and Speculations." Federal Reserve Bank of Kansas City Economic Review (2001): 29-59.

Levy, Frank, and Richard J. Murnane. The New Division of Labor: How Computers Are Creating the Next Job Market. Princeton, NJ: Princeton University Press, 2004.

Rosenberg, Nathan, and L.E. Birdzell, Jr. How the West Grew Rich: The Economic Transformation of the Industrial World. New York: Basic Books, 1986.

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Source of image of the books: http://www.buy.com/prod/the-new-palgrave-dictionary-of-economics-second-edition/q/loc/106/204470936.html

Today (May 30, 2008) is the publication date of the second edition of The New Palgrave Dictionary of Economics, which includes my "Economics of Science" article. The article surveys the history and current status of research on the economics of science, and the relationship of the economics of science to the economics of technology.

For a much earlier, and much longer, take on some of the same issues, see "The Economics of Science."

References to both articles:

Diamond, Arthur M., Jr. "Economics of Science." In The New Palgrave Dictionary of Economics, 2nd Edition, edited by Steven N. Durlauf and Lawrence E.Blume. Basingstoke and New York: Palgrave Macmillan, 2008.

Diamond, Arthur M., Jr. "The Economics of Science." Knowledge and Policy 9, no. 2 & 3 (1996): 6-49.

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"A rendering of XCOR's Lynx rocket-powered vehicle." Source of the caption and image: online version of the WSJ article quoted and cited below.

(p. B1) A price war already is brewing among companies seeking to sign up would-be space tourists, years before the first privately financed rocketplanes are scheduled to begin flying.

XCOR Aerospace of Mojave, Calif., the latest entrant to the derby to blast thrill-seekers into the upper reaches of the atmosphere, is expected to unveil plans Wednesday for a rocket-powered vehicle that is substantially smaller, slower and less expensive to build than any of those proposed by rivals. With tickets projected at $100,000 a pop, the low-fare carrier to the heavens would hardly be cheap.

Anticipated to cost less than $10 million to build and to be more compact than many propeller planes used by recreational pilots, XCOR's Lynx vehicle is intended to carry a pilot and a single passenger at twice the speed of sound to about 37 miles above the earth. The entire outing, which would begin and end at a conventional airport and include about two minutes of suborbital zero gravity, would take less than half an hour.

That is a significantly shorter trip -- and only about half the ticket price -- envisioned by British billionaire Sir Richard Branson on his Virgin Galactic spaceship. A sleek and more powerful six-passenger craft, it is designed to travel at about four times the speed of sound and zoom completely out of the atmosphere -- reaching true space more than 60 miles above the earth.

For the full story, see:

ANDY PASZTOR. "Economy Fare ( $100,000) Lifts Space-Tourism Race." The Wall Street Journal (Weds., March 26, 2008): B1-B2.

"Virgin Galactic will launch its rocket from a plane." Source of the caption and image: online version of the WSJ article quoted and cited above.

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

(p. B1) Corning Inc. has survived for 157 years by betting big on new technologies, from ruby-colored railroad signals to fiber-optic cable to flat-panel TVs. And now the glass and ceramics manufacturer is making its biggest research bet ever.

Under pressure to find its next hit, the company has spent half a billion dollars -- its biggest wager yet -- that tougher regulations in the U.S., Europe and Japan will boost demand for its emissions filters for diesel cars and trucks.

. . .

An investment 25 years ago has turned Corning into the world's largest maker of liquid-crystal-display glass used in flat-panel TVs and computers. But another wager, which made it the biggest producer of optical fiber during the 1990s, almost sank the company when the tech boom turned into a bust.

In Erwin, a few miles from the company's headquarters in Corning, the glassmaker is spending $300 million to ex-(p. B2)pand research labs. There, some 1,700 scientists work on hundreds of speculative projects, from next-generation lasers to optical sensors that could speed the discovery of drugs.

"Culturally, they're not afraid to invest and lose money for many years," says UBS analyst Nikos Theodosopoulos. "That style is not American any more."

Corning also goes against the grain in manufacturing. While it has joined the pack in moving most of its production overseas, it eschews outsourcing and continues to own and operate the 50 factories that churn out thousands of its different products.

Corning argues that retaining control of research and manufacturing is both a competitive advantage and a form of risk management. Its strategy is to keep an array of products in the pipeline and, once a market develops, to build factories to quickly produce in volumes that keep rivals from gaining traction.

For the full story, see:

SARA SILVER. "Corning's Biggest Bet Yet? Diesel-Filter Technologies." The Wall Street Journal (Fri., March 7, 2008): B1-B2.

(Note: ellipsis added.)

"Corning DuraTrap diesel-engine filter." Source of caption and photo: online version of the WSJ article quoted and cited above.

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(p. 492) The long-standing trend away from value produced by manual labor and natural resources and toward the intangible value-added we associate with the digital econnomy can be expected to continue. Today it takes a lot less physical material to produce a unit of output than it did in generations past. Indeed, the physical amount of materials and fuels either consumed in the production of output or embodied in the output has increased very modestly over the past half century. The output of our economy is not quite literally lighter, but it is close.

Thin fiber-optic cable, for instance, has replaced huge tonnages of copper wire. New architectural, engineering, and materials technologies have enabled the construction of buildings enclosing the same space with far less physical material than was required fifty or one hundred years ago. Mobile phones have not only downsized but also morphed into multipurpose communication devices. The movement over the decades toward production of services that require little physical input has also been a major contributor to the marked rise in the ratio of constant dollars of GDP to tons of input.

Source:

Greenspan, Alan. The Age of Turbulence: Adventures in a New World Economic Flexibility. New York: Penguin Press, 2007.

(Note: italics in original.)

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"Apple's chief executive, Steven P. Jobs, left, and the venture capitalist John Doerr at Apple headquarters in Cupertino, Calif." Source of caption and photo: online version of the NYT article cited below.

(p. C3) CUPERTINO, Calif. -- Steven P. Jobs, Apple's chief executive, is hoping to expand the iPhone's appeal by luring software developers to create programs for it.

John Doerr, the venture capitalist, is adding an incentive: his firm is putting up $100 million to invest in the work of those programmers.

At an event Thursday at Apple headquarters, Mr. Jobs announced a low-cost software development kit that outside programmers can use to create programs for the iPhone, much as they now write the vast majority of the programs created for the Macintosh. Until now, iPhones have officially been able to run only the limited assortment of applications that Apple includes. (Some buyers have modified the phones to add unauthorized software.)

"We're very excited about this," said Mr. Jobs, who also announced that the company was adding features to make the iPhone more appealing to business users. "We think a lot of people, after understanding where we are going, are going to want to become an iPhone developer."

Sharing the stage with Mr. Jobs, Mr. Doerr announced that his firm, Kleiner Perkins Caufield & Byers, had established a $100 million venture capital fund for iPhone entrepreneurs. Called the iFund, it is the largest fund the company has created for a specific technology.

"The potential for iPhone is huge," Mr. Doerr said.

For the full story, see:

LAURIE J. FLYNN. "Apple to Encourage iPhone Programmers." The New York Times (Fri., March 07, 2008): C3.

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(p. A14) You're saying to yourself, haven't Google and friends been gnashing their teeth over the landline practices of the Verizons and Comcasts, demanding "net neutrality" regulations to be erected against crimes to be named later? Yes, and without much success. Consider a recent Rensselaer Polytechnic Institute study that found that imposing Google's idea of "net neutrality" (i.e., restricting a network operator's ability to prioritize urgent and non-urgent data) would end up cutting a network's peak capacity in half.

Now Google and friends are turning to wireless, which they hope will prove a softer target. Here operators traditionally have built networks for the restricted purpose of letting customers make voice calls with an operator-supplied cellphone. But most operators have also started rolling out all-purpose broadband on their wireless networks, albeit high-priced and painfully slow (evidence of their need to ration capacity carefully to protect higher-priority voice traffic).

Verizon offers BroadbandAccess, a service that allows a customer, with a laptop card, to use Verizon's wireless network for Web surfing. AT&T, T-Mobile and Sprint offer similar services. Likewise, Sprint and Clearwire are building out a new kind of wireless network, WiMax, for truly fast mobile broadband.

That's not good enough for Google and its allies, who want the government to require wireless operators to provide unrestricted Web surfing to buyers of basic phone plans. Don't be misled by the "net neutrality" and "open access" masquerades. This is nothing but business-model chauvinism, aided not a little by the mental clottedness of regulators, who evidently can be led to believe that any network operating on digital principles must be packaged and sold to customers in only one way.

. . .

Make no mistake: Google understands that restricting a wireless operator's ability to design its own business model can, by definition, only reduce its incentive to invest. But Google has bigger fish to fry. It wants to make sure it can continue to free-ride on your broadband subscription bills, even in the mobile world. It wants to make sure it won't have to share the proceeds of its massive search and advertising dominance with suppliers of network capacity.

Most of all, it wants to replicate in mobile search and advertising the overpowering position it has achieved in the fixed broadband world -- something that might not be possible if wireless operators are left any opportunity to carve out a business model other than as simply suppliers of the proverbial "dumb pipe."

For the full commentary, see:

Holman W. Jenkins, Jr. "Business World: Sort of Evil." Wall Street Journal (Weds., July 18, 2007): A14.

(Note: ellipsis added.)

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The story quoted below tells how outsourcing high-tech jobs to India has bid up the salaries of high-tech Indian engineers, thereby reducing the appeal of further outsourcing. Marvelous how the market works!

Another lesson from the story applies to forecasting: mechanical extrapolation of current trends is inferior to prediction that takes account of predictable changes in prices (in this case, salaries).

(p. A15) Around the century's turn, when U.S. companies first began flooding to India for its cheap labor, pundits warned that the subcontinent could increasingly rob the U.S. of high-end white-collar jobs. Debate was especially sharp in Silicon Valley, then in a slump, because India annually turns out nearly 500,000 engineering graduates.

. . .

Several years on, the forces of globalization are starting to even things out between the U.S. and India, in sophisticated technology work. As more U.S. tech companies poured in, they soaked up the pool of high-end engineers qualified to work at global companies, belying the notion of an unlimited supply of top Indian engineering talent. In a 2005 study, McKinsey & Co. estimated that just a quarter of India's computer engineers had the language proficiency, cultural fit and practical skills to work at multinational companies.

The result is increasing competition for the most skilled Indian computer engineers and a narrowing U.S.-India gap in their compensation. India's software-and-service association puts wage inflation in its industry at 10% to 15% a year. Some tech executives say it's closer to 50%. In the U.S., wage inflation in the software sector is under 3%, according to Moody's Economy.com.

Rafiq Dossani, a scholar at Stanford University's Asia-Pacific Research Center who recently studied the Indian market, found that while most Indian technology workers' wages remain low -- an average $5,000 a year for a new engineer with little experience -- the experienced engineers Silicon Valley companies covet can now cost $60,000 to $100,000 a year. "For the top-level talent, there's an equalization," he says.

For the full story, see:

Pui-Wing Tam and Jackie Range. "Second Thoughts: Some in Silicon Valley Begin to Sour on India; A Few Bring Jobs Back As Pay of Top Engineers In Bangalore Skyrockets." Wall Street Journal (Tues., July 3, 2007): A1 & A15.

(Note: ellipsis added.)

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Burt Rutan's current design for WhiteKnightTwo, carrying the smaller SpaceShipTwo spaceship. Source of image: http://www.techno-science.net/?onglet=news&news=4993

(p. A18) Virgin Galactic, the company that hopes to fly well-heeled tourists to the edge of space by the end of 2009, provided a peek Wednesday at the craft that will take them there.

During a news conference at the American Museum of Natural History in Manhattan, Richard Branson, the British entrepreneur whose Virgin Airways is the parent company of the project, said 2008 would be "the year of the spaceship."

Mr. Branson showed models of two vehicles, both created by the airplane designer Burt Rutan. WhiteKnightTwo, a two-fuselage, four-engine plane, is designed to ferry a smaller spacecraft, SpaceShipTwo, high into the sky and release it. The pilot of SpaceShipTwo will then fire the craft's rocket engine, which burns a combination of nitrous oxide and a rubber-based solid fuel, shooting the vehicle to an altitude of more than 62 miles into the realm of black sky.

For the full story, see:

JOHN SCHWARTZ. "Built to Fly Into Space With the Greatest of Ease (They Hope)." The New York Times (Thurs., January 24, 2008): A18.

Artist's rendering of SpaceShipTwo spaceship. Source of image: http://www.techno-science.net/?onglet=news&news=4993

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The quotes below from a WSJ summary of a Nov. 16, 2007 The Chronicle of Higher Education article, suggests that we do not need to worry about the sometimes-alleged "shortage" of scientists and engineers:

(p. B14) The federal dollars pumped into university science departments has created more scientists and engineers than the market wants, said Michael S. Teitelbaum, vice president of Alfred P. Sloan Foundation, which sponsors research, at a hearing in Congress last week. Mr. Teitelbaum said the federal government should find a way to adjust how it funds university research so that university departments don't end up using the extra money to add graduate students and postdoctoral fellows

For the full summary, see:

"The Informed Reader; Science; U.S. Faces a Glut (Really) of Scientists, Engineers." The Wall Street Journal (Tues., November 13, 2007): B14.

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

(p. A3) The sweeping patent initiative -- backed by a business coalition dominated by technology companies such as Cisco Systems Inc. and Microsoft Corp. -- would . . . shift the balance of power of the U.S. patent system. It would make it a bit harder for holders to protect patents.  Advocates of the legislation contend the current system encourages patent litigation and costly judgments against infringers -- and stifles innovation.  They say the proposals are designed to bring patent rules in line with the rapidly changing U.S. economy, where inventions often reflect hundreds of potentially patentable ideas.

Mark Chandler, Cisco's general counsel, dismissed concerns that non-U.S. companies might gain some advantage by the bill. He said the proposed changes would strengthen companies at "the heart of innovation in the American economy," better positioning them to compete at home and abroad.

Opponents of the legislation argue that it would make it easier for foreign competitors to legally copy patented methods and products.

For the full story, see:

GREG HITT.  "Patent System's Revamp Hits Wall; Globalization Fears Stall Momentum in Congress; AFL-CIO Sends a Letter."  The Wall Street Journal  (Mon., August 27, 2007):   A3.

(Note:  ellipsis added.)

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    Source of graph:  online version of the NYT article quoted and cited below.

The article quoted below suggests that an important new "disruptive" memory technology may be on the horizon.  It sounds as though it would be what economists call a "general purpose technology" that would be useful in generating a large number of innovative applications. 

(My guess is that in Christensen's terminology, this technology would be more sustaining, than disruptive, since the technology seems as though it would be of immediate interest to the mainstream market.)

(p. C1)  SAN JOSE, Calif. -- The ability to cram more data into less space on a memory chip or a hard drive has been the crucial force propelling consumer electronics companies to make ever smaller devices.

It shrank the mainframe computer to fit on the desktop, shrank it again to fit on our laps and again to fit into our shirt pockets.

. . .  

Mr. Parkin thinks he is poised to bring about another breakthrough that could increase the amount of data stored on a chip or a hard drive by a factor of a hundred. If he proves successful in his quest, he will create a "universal" computer memory, one that can potentially replace dynamic random access memory, or DRAM, and flash memory chips, and even make a "disk drive on a chip" possible.

. . .

(p. C8)  Mr. Parkin's new approach, referred to as "racetrack memory," could outpace both solid-state flash memory chips as well as computer hard disks, making it a technology that could transform not only the storage business but the entire computing industry.

"Finally, after all these years, we're reaching fundamental physics limits," he said. "Racetrack says we're going to break those scaling rules by going into the third dimension."

His idea is to stand billions of ultrafine wire loops around the edge of a silicon chip -- hence the name racetrack -- and use electric current to slide infinitesimally small magnets up and down along each of the wires to be read and written as digital ones and zeros.

. . .

Mr. Parkin said he had recently shifted his focus and now thought that his racetracks might be competitive with other storage technologies even if they were laid horizontally on a silicon chip.

I.B.M. executives are cautious about the timing of the commercial introduction of the technology. But ultimately, the technology may have even more dramatic implications than just smaller music players or wristwatch TVs, said Mark Dean, vice president for systems at I.B.M. Research.

"Something along these lines will be very disruptive," he said. "It will not only change the way we look at storage, but it could change the way we look at processing information. We're moving into a world that is more data-centric than computing-centric."

This is just a hint, but it suggests that I.B.M. may think that racetrack memory could blur the line between storage and computing, providing a key to a new way to search for data, as well as store and retrieve data.

And if it is, Mr. Parkin's experimental physics lab will have transformed the computing world yet again.

For the full story, see: 

JOHN MARKOFF.  "Redefining the Architecture of Memory."  The New York Times   (Tues., September 11, 2007):  C1 & C8.

(Note:  ellipses added.)

     Of the two photos at the bottom of the entry, the first is of Stuart S. P. Parkin's lab at I.B.M, and the second is of Parkin in the lab.  Source of photos:  online version of the NYT article quoted and cited above.

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  Moving water is easier with the 20-gallon rolling drum.  Source of photo:  online version of the NYT article quoted and cited below.

(p. D3)  . . . , the Cooper-Hewitt National Design Museum, . . . , is honoring inventors dedicated to “the other 90 percent,” particularly the billions of people living on less than $2 a day.

Their creations, on display in the museum garden until Sept. 23, have a sort of forehead-thumping “Why didn’t someone think of that before?” quality.

. . .

Interestingly, most of the designers who spoke at the opening of the exhibition spurned the idea of charity.

“The No. 1 need that poor people have is a way to make more cash,” said Martin Fisher, an engineer who founded KickStart, an organization that says it has helped 230,000 people escape poverty.  It sells human-powered pumps costing $35 to $95.

Pumping water can help a farmer grow grain in the dry season, when it fetches triple the normal price.  Dr. Fisher described customers who had skipped meals for weeks to buy a pump and then earned $1,000 the next year selling vegetables.

For the full story, see: 

DONALD G. McNEIL Jr.  "Design That Solves Problems for the World's Poor."  The New York Times  (Tues., May 29, 2007):  D3.

(Note:  ellipses added.)

   The photo on the left shows a woman safely drinking bacteria-laden water through a filter.  The photo on the right shows a "pot-in-pot cooler" that evaporates water from wet sand between the pots, in order to cool what is in the inner pot.  Source of photos:  online version of the NYT article quoted and cited above.

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   Source of image:  edited scan from page 21 of Levathes's book cited below.

It is an enduring puzzle why the West has been so much more succesful than China in achieving economic growth over the past several centuries.  The puzzle arises because there is considerable evidence of early Chinese acheivements in technology.

One example would be the exploratory voyages of Zheng He.  As can be seen in the image above, the Chinese ships were much, much larger than those of Christopher Columbus.  But as Clayton Christensen has shown in a more modern context, size does not always matter as much as nimbleness and motivation. 

(And another part of the story involves culture and institutions.)

The reference for the Levathes book, is:

Levathes, Louise. When China Ruled the Seas: The Treasure Fleet of the Dragon Throne, 1405-1433. Oxford, UK: Oxford University Press, 1996.

The most complete account of Christensen's thinking, so far, is his book with Raynor:

Christensen, Clayton M., and Michael E. Raynor.  The Innovator's Solution:  Creating and Sustaining Successful Growth.  Boston, MA: Harvard Business School Press, 2003.

(Note:  I am grateful to Prof. Yu-sheng Lin for first showing me the image at the top of this post.  I am also grateful to Prof. Salim Rashid, and Liberty Fund's Mr. Leonidas Zelmanovitz, for my having the opportunity to encounter Prof. Lin.)

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   "Luis H. Rodriguez, an I.B.M. executive, with his children, Alec, 5, and Evia, 2, often works from his home or on the road."  Source of photo:  online version of the NYT article quoted and cited below.

Daniel Pink in his Free Agent Nation argued that a growing number of American workers would want the control, challenge and freedom of working for themselves as entrepreneurs, or "free agents."  To attract workers who have the option of being free agents, it is plausible that employers increasingly will have to offer jobs that provide workers with greater autonomy.  The article quoted below, suggests that this may in fact be happening, at least in information technology firms. 

(p. A1)  SOMERS, N.Y. -- It's every worker's dream: take as much vacation time as you want, on short notice, and don't worry about your boss calling you on it. Cut out early, make it a long weekend, string two weeks together -- as you like. No need to call in sick on a Friday so you can disappear for a fishing trip. Just go; nobody's keeping track. 

That is essentially what goes on at I.B.M., one of the cornerstones of corporate America, where each of the 355,000 workers is entitled to three or more weeks of vacation. The company does not keep track of who takes how much time or when, does not dole out choice vacation times by seniority and does not let people carry days off from year to year.

Instead, for the past few years, employees at all levels have made informal arrangements with their direct supervisors, guided mainly by their ability to get their work done on time. Many people post their vacation plans on electronic calendars that colleagues can view online, and they leave word about how they can be reached in a pinch.

"It's like when you went to college and you didn't have high school teachers nagging you anymore," said Mark L. Hanny, I.B.M.'s vice president of independent software vendor alliances. "Employees like that we put more accountability on them."

. . .

(p. 18)   Aided by broadband connections, cellphones and video conferencing software, 40 percent of I.B.M.'s employees have no dedicated offices, working instead at home, at a client's site, or at one of the company's hundreds of "e-mobility centers" around the world, where workers drop in to use phones, Internet connections and other resources.

. . .

Luis H. Rodriguez, the director of market management in I.B.M.'s software group, said he visits his office here in Somers about once a week, working the rest of the time on the road or at his home in Ridgefield, Conn., where he sat one recent afternoon at the kitchen table with his laptop open.

He said that in six years at I.B.M. he can recall only one time when he asked a co-worker not to take a long weekend off -- when their group was about to buy another company -- and that calling colleagues or checking e-mail while visiting relatives in Texas or Illinois is a fair trade for being able to work from home so he can spend more time with his children, Alec, 5, and Evia, 2.

. . .

"If you look at the organizations that have done more radical things, they tend to be technology companies with salaried people," where flexibility in job performance "is embedded into the culture of the place," noted Max Caldwell, a managing principal in the work force effectiveness area at Towers Perrin, a human resources consultant.

Indeed, I.B.M.'s Mr. Calo said that the flexibility has helped the company compete with the more freewheeling atmosphere at start-up rivals in the technology world that have lured away some of its talent over the years.

For the full story, see:

KEN BELSON.  "At I.B.M., a Vacation Anytime, Or Maybe No Vacation at All."   The New York Times  (Fri., August 31, 2007):  A1 & A18.

(Note:  ellipses added.)

The reference for the Pink book, is:

Pink, Daniel H.  Free Agent Nation:  How America's New Independent Workers Are Transforming the Way We Live.  New York: Warner Business Books, 2001.

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Source of graph: online version of the NYT article quoted and cited below.

(p. 14) To understand why consumption is a better guideline of economic prosperity than income, it helps to consider how our lives have changed. Nearly all American families now have refrigerators, stoves, color TVs, telephones and radios. Air-conditioners, cars, VCRs or DVD players, microwave ovens, washing machines, clothes dryers and cellphones have reached more than 80 percent of households.

As the second chart, on the spread of consumption, shows, this wasn't always so. The conveniences we take for granted today usually began as niche products only a few wealthy families could afford. In time, ownership spread through the levels of income distribution as rising wages and falling prices made them affordable in the currency that matters most -- the amount of time one had to put in at work to gain the necessary purchasing power.

At the average wage, a VCR fell from 365 hours in 1972 to a mere two hours today. A cellphone dropped from 456 hours in 1984 to four hours. A personal computer, jazzed up with thousands of times the computing power of the 1984 I.B.M., declined from 435 hours to 25 hours. Even cars are taking a smaller toll on our bank accounts: in the past decade, the work-time price of a mid-size Ford sedan declined by 6 percent.

For the full commentary, see:

W. MICHAEL COX and RICHARD ALM. "You Are What You Spend." The New York Times Company, Week in Review section (Sun., February 10, 2008): 14.

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     "Delta Air Lines uses G.P.S. technology to reduce the time its planes spend on the runway."  Source of caption and photo:  online version of the NYT article quoted and cited below. 

(p. C1)  WASHINGTON, Sept. 4 — At Hartsfield-Jackson Atlanta International Airport, Delta Air Lines said its jets take off an average of 10 minutes after pushing back from the gate — three minutes faster than in previous years.

Using new technology, planes take off following a narrow route, so that that jets right behind them taking different routes do not have to wait as long. That makes the system move a bit faster.

“The pilots say, ‘Wow, this is kind of neat,’ ” said Joseph C. Kolshak, executive vice president for operations at Delta.

Delta, and also Alaska Airlines and U.P.S., is demonstrating pieces of the possible future of the nation’s air traffic system, hinting at what aviation might be like — if the airlines and the federal government can get the details worked out.

All three airlines use refinements based on the constellation of G.P.S., or global positioning system, satellites. Many of these save at most a few minutes. But in a crowded system plagued by delays, that may be enough to help smooth out bottlenecks.

The carriers’ use of satellite navigation and other tools and techniques represents a step toward replacing a 50-year-old system of radar and radio beacons.

In the process, they are pulling along a slow-moving government agency, the Federal Aviation Administration, that is eager for better air traffic control systems but short on money and the authority to put changes in place.

It is a revolution in technology, but also in politics. Previously, the F.A.A. usually bought new systems on the ground and told airlines to equip themselves to use them; now the airlines are taking the initiative to outfit their planes, with safety regulation from the F.A.A.

Airlines are even developing their own approach patterns for airports, which has almost always been a government job.

U.P.S. Airlines, working with Aviation Communications and Surveillance Systems, based in Phoenix, is developing a landing pattern based on separating planes by time, not distance, so they land at the briefest safe interval.

“We’re going to create the future, because we think we know (p. C5) where it’s going to go,” said Karen Lee, director of operations at U.P.S. This is in contrast to the traditional way of doing business, typified by “the F.A.A. tells us what the roadmap is,” she said, then “we’ll start building the stuff to do it.”

For the full story, see:

MATTHEW L. WALD.  "For Airlines, Hands-On Air Traffic Control."  The New York Times  (Weds., September 5, 2007):  C1 & C5. 

    "A device that U.P.S. installed in the cockpit of one of its cargo planes to display traffic information."  Source of caption and photo:  online version of the NYT article quoted and cited above.

Posted by Art Diamond at 1:01 AM | Permalink | Comments (0)

    "Fred Mitschele with his high-tech meter."  Source of photo:  online version of the NYT article quoted and cited below.

Hight-tech parking meters like the ones described in the article quoted below, could be used to make real-time changes in parking prices.  Higher rates during busier periods, would assure available spaces, which would reduce wasted time searching for parking spaces, thereby reducing congestion, and pollution. 

(p. 14)  If drivers want to use cash, the meters, which connect to a wireless network, can send text messages to the drivers’ cellphones to remind them to add more money.

The meters also communicate with traffic officials who can track which meters are being used and which ones need to be ticketed and serviced. To ensure that drivers do not skip out without paying, sensors the size of hockey pucks buried in the asphalt detect when cars pull in. A camera inside the meter takes pictures of license plates to help with enforcement.

. . .

The meters are just one example of how telecommunications are increasingly being integrated into toll and fee collection. E-ZPass, for instance, relies on radio frequency tags, cameras and networks to transmit data.

For the full story, see: 

KEN BELSON.  "MOTORING; Wait a Minute. My Parking Meter Is Calling."  The New York Times, SportsSunday Section  (Sun., September 9, 2007):  14.

(Note:  ellipsis added.)

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    Source of graphic:  online version of the NYT article quoted and cited below.

Entrepreneurship thrives when government is small, so it puzzles me when the entrepreneurs in Silicon Valley embrace the Democrats, who generally advocate bigger government.

Of course, my Wabash professor Ben Rogge used to point out that there are always cross-currents that go in a different direction from the mainstream. And among the Democrats, there are what used to be called "new Democrats" who appreciate Schumpeter, and entrepreneurship, and dynamism.

Plus, some Democrats are more respectful of personal, lifestyle choices, and in Silicon Valley, that may be what is given the most weight.

Or, more cynically, maybe there's a public choice explanation---that Silicon Valley donates to Democrats as a form of 'insurance,' in the hope that if the Democrats are elected, they will refrain from over-regulating and over-taxing Silicon Valley. (Even more cynically, compare the case of Florida's sugar-subsidy-rich Fanjul brothers, one of whom donated huge bucks to the first Bush, while another donated huge bucks to Bill Clinton.)

(Another factor is that, alas, entrepreneurs often do not pay much attention to what conditions encourage entrepreneurship.)

(p. C4)  In a flip from the primary season for the 2000 presidential election, 60 percent of the contributions so far from people in the technology field here are going to Democrats. The Democratic candidates raised $1.4 million from the industry in the first half of this year, while Republican candidates raised $890,000. That total is up from $1.2 million in the first six months of each of the last two presidential primary races.

For the full story, see: 

LAURIE J. FLYNN.  "In Primary, Tech's Home Is a Magnet." The New York Times  (Fri., August 24, 2007):  C1 & C4.

     "John McCain, with Google’s chief executive, Eric E. Schmidt, was at the company’s campus in May."  Source of caption and photo:  online version of the NYT article quoted and cited above.

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(p. A15)  A core belief of Mr. Gates is that technology can erase problems that seem intractable. That belief was deepened, Mr. Gates says, by his study of Julian Simon, a now-deceased business professor who argued that increases in wealth and technology would offset shortages in energy, food and other global resources.

Pacing in his office last week, Mr. Gates retold the story of a famous $10,000 wager between Mr. Simon and Paul Ehrlich, a Stanford University professor who predicted that human population growth would outstrip the earth's resources.  Mr. Simon bet that even as a growing population increased demand for metals such as tin and copper, the price of those metals would fall within the decade ending in 1990. Mr. Simon won the bet. "He cremated the guy," says Mr. Gates.  Mr. Ehrlich's administrator at Stanford University said he was out of the country and couldn't comment on the wager.

For the full story, see:

ROBERT A. GUTH.  "Bill Gates Issues Call For Kinder Capitalism; Famously Competitive, Billionaire Now Urges Business to Aid the Poor."  The Wall Street Journal  (Thurs., January 24, 2008):  A1 & A15.

Posted by Art Diamond at 1:01 AM | Permalink | Comments (0)

"Lower-price 3-D printers like this one from Z Corp. are spawning new businesses."  Source of caption and photo:  online version of the WSJ article quoted and cited below.

Neil Gershenfeld has argued that in the not-too-distant-future, ordinary people will have the ability fabricate objects of their own design, in their own home.  His lab at MIT has been developing prototypes to fulfil this vision.  The 3-D printers discussed in the article quoted below, are the earliest exemplars of this vision, to make it to the market.

If this vision is realized, the benefits to consumers could be immense, in terms of variety of products, speed in obtaining products, and consumer control over what is consumed.

(p. B1)  The expansion by 3-D printers into manufacturing is happening thanks to a steady drop in the price of printers, improvements in the materials they can handle and a proliferation in the amount of 3-D data that can be turned into objects.

Historically, the printers cost hundreds of thousands of dollars and were made by a handful of small companies including Z Corp. and Stratasys Inc. But now those and other new companies are producing more-affordable machines priced below $20,000, a change that has radically expanded sales.

The 3-D printing industry is about 20 years old, and in the past two years alone, it has sold around 8,000 machines, or 36% of the industry's two-decade world-wide sales total of 22,000, according to consulting firm Wohlers Associates.

And sales are likely to increase further: A Pasadena, Calif., venture called Desktop Factory Inc. has already taken 350 pre-orders for a $5,000 3-D printer it plans to roll out next year, says Cathy Lewis, CEO of the company. About 40% of those orders are from universities and 35% from small businesses, she says. The company predicts printers could start finding their way into homes in five years or so.

For the full story, see:

ROBERT A. GUTH.  "How 3-D Printing Figures To Turn Web Worlds Real."  The Wall Street Journal  (Weds., December 12, 2007):  B1.

The reference to the Gershenfeld book is: 

Gershenfeld, Neil.  Fab: The Coming Revolution on Your Desktop--from Personal Computers to Personal Fabrication.  New York:  Basic Books, 2005.

"World of Warcraft figure made with a 3-D printer."  Source of caption and photo:  online version of the WSJ article quoted and cited above.

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Stephanie and Bill Faunce moved their marketing company from Los Angeles to Steamboat Springs, Colorado.  Source of photo:  online version of the NYT article quoted and cited below.

Information technology is making life better by providing greater choice on where to live.  There is still a lively debate about which regions and cities will prosper.

One popular take on this issue is Richard Florida's The Rise of the Creative Class.  

(p. A1)  As technology enables people to live and work wherever they want, increasingly they are clustering in resort playgrounds like Steamboat Springs (pop. 9,315) that have natural amenities, good weather — and, now, lots of people like themselves.

In places like Nantucket, the Upper Peninsula of Michigan and Teton County, Idaho, the migrants are creating hybrid communities, implanting urban incomes, tastes, careers, ambitions, restaurants, cultural activities and networking opportunities into small towns that un-(p. A15)til recently could support none of these, and for which there has been little planning and still no consensus.

“You are seeing a transformation of rural communities,” said Jonathan Schechter, executive director of the Charture Institute in Jackson, Wyo., a nonprofit organization that studies small recreational towns.

Into quiet resort spots the migrants have come, laptops on their knees: fund managers from New York, software developers from California, consultants, proofreaders, engineers, inventors. “The same processes that led to the suburbanization of the United States after World War II,” Mr. Schechter said, “are now producing a virtual suburbanization in places like Jackson or Steamboat Springs.”

From 2000 to 2006, population in the 297 counties rated highest in natural amenities by the United States Department of Agriculture grew by 7.1 percent, 10 times the rate for the 1,090 rural counties with below-average amenities, the department reported.

In towns that once emptied after the ski season or the beach season, these “location-neutral” migrants are complicating the traditional dynamic between tourists and locals. Here as elsewhere, average homes have become unaffordable for teachers, firefighters and others — the people who created the good schools and community closeness that newcomers said drew them. The rate of change “is causing a whiplash,” Mr. Schechter said, “because the towns don’t have the political and economic systems in place to deal with them.”

Routt County, which includes Steamboat Springs, is one of the first places to identify these new émigrés as a source of economic growth and, paradoxically, community stability. A 2005 survey found that as many as 1 in 10 year-round households was involved in a location-neutral business. Unlike retirees and second-home buyers, who are also roosting in vacation towns, they send children to the local schools. “Without kids, you don’t have a community,” said Scott Ford, a counselor at the Small Business Resource Center at Colorado Mountain College.

Cloistered in home offices, isolated from the local economy, location-neutrals are often invisible even to one another, except when they appear on local committees.

Many work as hard as their urban counterparts, often juggling commitments in several time zones, but can step from their offices to a hiking trail or mountain stream.

. . .

For Bill and Stephanie Faunce, who run a marketing company for cable operators, small-town life often means starting work at 7 a.m. and quitting at 11 p.m., but with breaks to hike, ski or be with their two young children. Their goal in coming here was not to slow down but to eliminate urban distractions and pressures.

“There are no stressors here,” said Mr. Faunce, 43. “In L.A., it took 90 minutes to get to the office, so we had a Mercedes and a Land Rover. Now we drive a Suburban. In three years we’ve put 15,000 miles on it.”

For the full story, see:

JOHN LELAND.  "Off to Resorts, and Carrying Their Careers."  The New York Times  (Mon., August 13, 2007):  A1 & A15.

(Note:  ellipsis added.)

The reference for Florida's book, is:

Florida, Richard. The Rise of the Creative Class: And How It's Transforming Work, Leisure, Community and Everyday Life. New York: Basic Books, 2002.

   Source of maps:  online version of the NYT article quoted and cited above.

Posted by Art Diamond at 1:01 AM | Permalink | Comments (1)

    Source of book image:  http://palmaddict.typepad.com/photos/uncategorized/big_larsonthunderstruckdrm_1.jpg

Larson's book plays off a murder mystery against Marconi as the innovator who brought us communication through the air. 

I'm most enthused about hte Marconi part.  It shows how he proceeded against the theorists of the day, whose theories told them that what he was trying to do was impossible.  He was more entrepreneur, than scientist.  And it turned out that it was a good thing that the theoretical scientists did not rule, as they might if all decisions about technology were made by the government.

What happened here is an example of what Taleb would call a Black Swan.

Source:

Larson, Erik. Thunderstruck. New York: Crown, 2006.

Posted by Art Diamond at 1:01 AM | Permalink | Comments (1)

    Source of book image:  http://palmaddict.typepad.com/photos/uncategorized/big_larsonthunderstruckdrm_1.jpg

Larson's book plays off a murder mystery against Marconi as the innovator who brought us communication through the air. 

I'm most enthused about hte Marconi part.  It shows how he proceeded against the theorists of the day, whose theories told them that what he was trying to do was impossible.  He was more entrepreneur, than scientist.  And it turned out that it was a good thing that the theoretical scientists did not rule, as they might if all decisions about technology were made by the government.

What happened here is an example of what Taleb would call a Black Swan.

Source:

Larson, Erik. Thunderstruck. New York: Crown, 2006.

Posted by Art Diamond at 1:01 AM | Permalink | Comments (1)

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

Why not solve the problem discussed below by privatizing airports, which would then have a profit-maximizing incentive to reduce congestion by charging more for landing rights?  And if the prices were bid high enough, that, in turn would provide an incentive to build more airports. 

(p. A1)  The nation's air-travel system approached gridlock early this summer, with more than 30% of June flights late, by an average of 62 minutes. The mess revved up a perennial debate about whether billions of dollars should be spent to modernize the air-traffic control system. But one cause of airport crowding and flight delays is receiving scant attention. Airlines increasingly bring passengers into jammed airports on smaller airplanes. That means using more flights -- and increasing the congestion at airports and in the skies around them.

At La Guardia, half of all flights now involve smaller planes: regional jets and turboprops. It's the same at Chicago's O'Hare, which is spending billions to expand runways. At New Jersey's Newark Liberty and New York's John F. Kennedy, 40% of traffic involves smaller planes, according to Eclat Consulting in Reston, Va. Aircraft numbers tell the tale: U.S. airlines grounded a net 385 large planes from 2000 through 2006 -- but they added 1,029 regional jets -- says data firm Airline Monitor.

As air-travel woes have spread, some aviation officials and regulators, including the head of the Federal Aviation Administration, have begun saying delays could be eased if airlines would consolidate some of their numerous flights on larger planes.

Just two problems with that. One is that airlines like having more flights with smaller jets. The other is that passengers like it, too.

. . .

Former American Airlines boss Robert Crandall says Congress should let the FAA go back to controlling slots, matching scheduling to capacity. Airport overcrowding is "fixable, but it's not fixable without major policy change," the former AMR Corp. CEO said at a recent conference.

Another proposal: Change the structure of landing fees. Airports now set them by weight. A small jet pays a smaller landing fee than a large plane, even though its use of the runway is the same. Why not charge a flat fee per landing, suggest some economists -- or even charge the small jets more, to encourage airlines to shift to fewer flights on larger jets?

Yet another idea is to tie landing fees to the level of demand through the day, so they'd cost more at peak hours. This would encourage airlines to spread out flights and use bigger planes, says Dorothy Robyn, a consultant at Brattle Group and former aviation adviser in the Clinton administration. She says the current system "guarantees overuse of the air-traffic-control system because airlines aren't charged the true cost."

For the full story, see: 

SCOTT MCCARTNEY.  "FREQUENT FLYING; Small Jets, More Trips Worsen Airport Delays FAA Likes Bigger Craft But Passengers, Airlines Prefer Busy Schedules."  The Wall Street Journal  (Mon., August 13, 2007):  A1 & A13.

(Note:  ellipsis added.)

Posted by Art Diamond at 1:01 AM | Permalink | Comments (0)

   Source of graphic:  online version of the WSJ article cited below.

The innovation described in the article excerpted below is credited as arising from a 'skunk works' project.  There's a neat book called Skunk Works that describes how Lockheed set up an autonomous unit to develop the first stealth air force technology.  (Their plant was in a smelly part of town, so it was dubbed the 'Skunk Works.')

Clayton Christensen has recommended that established incumbent companies set up skunk works operations in order to develop disruptive technologies that would not survive if they were developed within the main corporate culture and infrastructure. 

(In the article excerpted below, it is puzzling to read that Alaska Air went to the trouble to take out a patent, even though they apparently have no intention of enforcing it.) 

(p. B1)  ANCHORAGE, Alaska -- When the Ted Stevens Anchorage International Airport was planning a new concourse, prime tenant Alaska Airlines insisted on a counterintuitive design: "The one thing we don't want is a ticket counter," said Ed White, the airline's vice president of corporate real estate.

So the 447,000-square-foot Concourse C, which opened in 2004, has only one small, traditional ticket counter, even though the carrier's 1.2 million Anchorage passengers checked in through that area last year. This unconventional approach -- which uses self-service check-in machines and manned "bag drop" stations in a spacious hall that looks nothing like a typical airport -- has doubled Alaska's capacity here, halved its staffing needs and cut costs, while speeding travelers through the building in far less time.

. . .

(p. B4)  Alaska's design in Anchorage has turned heads in the industry, and in 2006 the airline was awarded a U.S. patent for the check-in process, something it calls the two-step flow-through. Mr. White says his company isn't trying to keep competitors from going down the same path, but pursued the patent more to reward the many employees who helped to bring the idea to fruition.

Other airlines quickly sent scouts up to Anchorage to check out the new concourse, including a team from Delta Air Lines Inc., Mr. White says. A few months ago, Delta completed a $26 million renovation of its check-in hall at Hartsfield-Jackson Atlanta International Airport, and the finished product looks remarkably similar to that of Alaska Airlines. Greg Kennedy, Delta's vice president for customer service there, says the new layout has enabled the airline to process passengers checking in during the peak spring break travel period in 20 to 30 minutes at most, compared with two or three hours three years ago -- and all in the same amount of square footage but 50% more usable space. Mr. Kennedy says he isn't aware of a visit to Anchorage but doesn't dispute it.

. . .  

Alaska, the nation's ninth-largest carrier by traffic, started a "skunk works" lab a decade ago to figure out how to use technology to make air travel less of a hassle for passengers. Out of that effort came the airline's ground-breaking ability to sell tickets on the Internet and allow fliers to check in online, developments other carriers quickly followed.

For the full story, see: 

SUSAN CAREY.  "Case of the Vanishing Airport Lines; Alaska Air Speeds Up Flow Of Passengers by Jettisoning Traditional Ticket Counters."  The Wall Street Journal  (Thurs., August 9, 2007):  B1 & B4.

  Source of graphic:  online version of the WSJ article cited above.

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   Dr. Terence Kealey is currently Vice-Chancellor at England's only private university, the University of Buckingham.  Source of photo:  http://www.buckingham.ac.uk/publicity/academics/vc.html

Terence Kealey argues that science would be better done if it were all privately done, without government support.  As you might expect, Kealey has not won any popularity contests among those receiving government support. 

At the January American Economic Association (AEA) meetings in New Orleans, I heard a paper by Belenzon and Patacconi that presented evidence that scientists at private firms publish more research than Belenzon and Patacconi had expected to find.

Sounds like a bit of grist for Kealey's mill?

The reference to the AEA paper is:

Belenzon, Sharon, and Andrea Patacconi. "Firm Size and Innovation: Evidence from European Panel Data." Presented at meetings of the American Economic Association. New Orleans, Jan., 4, 2008.

The reference to Kealey's book is:

Kealey, Terence. The Economic Laws of Scientific Research. New York: St. Martin's Press, 1996.

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   Source of book image: http://www.amazon.com/gp/product/081763312X/ref=cm_rdp_product

Many years ago, I presented a paper on polywater at a conference at VPI (now called "Virginia Tech").  An old man in the audience came up to me afterwards, and told me about a book he had written called The Tender Ship.  It sounded intriguing so eventually I bought a copy and read it.

It is well-written, creative, and rich with examples.

The central thesis is that the government usually is not very good at directing technology.

The book reference is:

Squires, Arthur M.  The Tender Ship: Government Management of Technological Change.  Boston, Massachusetts:  Birkhauser, 1986.

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

(p. R10)  High-technology industries are tough places to do business.

Competition is constant, fierce and characterized by only temporary advantage, fueled by the ease with which software makers and other high-tech companies can copy and distribute new products and services.

Instantaneous delivery through the Internet to hundreds of millions of consumers means a company with a slightly better online marketplace or search engine, for example, can quickly dominate the market, and just as easily be dethroned by a rival with a new approach.

If this brutal competitive cycle -- first described as "creative destruction" by Austrian economist Joseph Schumpeter in 1942 -- makes you uncomfortable, we've got some bad news.

We've been studying competition in all U.S. industries, not just the high-tech ones, and we've observed a remarkable pattern: On average, the whole U.S. economy has become more "Schumpeterian" since the mid-1990s. What's more, these changes have been greatest in the industries that buy the most software and computer hardware.

Over the past dozen years, in other words, information-technology consumption is associated with the kinds of competitive dynamics we're accustomed to seeing in the IT-producing industries. And because every industry will become even more IT-intensive over the next decade, we expect competition to become even more Schumpeterian.

. . .

(p. R11)  For executives, the key lesson is to treat information-technology efforts as opportunities to define and deploy new ways of working, rather than just projects to install, configure or integrate systems. Our work suggests three broad areas of focus for top managers:

- First, they need to look at how the company should be doing business differently. That means deciding what new tasks should be enabled with technology, and how widely they should be deployed.

- Second, managers need to lead the deployment of new procedures to success. People don't like changes to their jobs dictated from outside and embedded in software. Overcoming this inertia and resistance requires skillful leadership.

- Third, managers need to foster innovation by encouraging experimentation, collaboration, dialogue and all of the other activities that generate good ideas. That means building a technology infrastructure and an accompanying set of practices that reduce the cost of creating and replicating process innovations.

Managers might not want competition in their industry to become more Schumpeterian, but they don't have a choice. Companies are using IT to increase the speed of process innovation and replication. These companies drive the competitive dynamics of their industries, rather than reacting to them, leaving their rivals with a stark choice: Adopt the Schumpeterian ethos of creative destruction, or watch from the sidelines as others increasingly gain market share and value.

For the full story, see: 

ANDREW MCAFEE and ERIK BRYNJOLFSSON.  "Technology; Dog Eat Dog; Be warned: Industries that buy a lot of technology are becoming as cutthroat as those that produce technology."  The Wall Street Journal  (Sat., April 28, 2007):  R10 & R11. 

(Note:  ellipsis added.)

Posted by Art Diamond at 1:01 AM | Permalink | Comments (0)

   "From left, Bob Weiss of the X Prize Foundation; Larry Page of Google; Peter Diamandis of X Prize; Buzz Aldrin, the astronaut."  Source of caption and photo:  online version of the NYT article quoted and cited below.

(p. 33)  THE quests are monumental: end global warming; build a private spaceship; cure diseases; develop a car that can go 100 miles on a gallon of gas.

But the prizes are also monumental: millions and millions of dollars.

Such extreme public interest projects have been taken up by foundations, most prominently the X Prize Foundation, an 11-year-old group in Santa Monica, Calif., that rewards innovation on an entirely new scale.

“The world faces difficult problems — bigger than government, business and nonprofits can handle,” said Tom Vander Ark, president of the X Prize Foundation. The foundation encourages entrepreneurship, he said, and “competitions can create and reshape markets.”

In 1996, the foundation offered a $10 million prize, called the Ansari X, for someone to invent a private passenger rocket ship able to fly nearly 70 miles up and back again. A team led by the aerospace engineer Burt Rutan, and paid for with more than $20 million from Paul G. Allen, a founder of Microsoft, collected the $10 million in 2004.

The X Prize Foundation is not alone in its ambitious ventures: Google.org, the nearly two-year-old philanthropic arm of Google, has kicked off a $10 million competition to inspire production of plug-in hybrid vehicles so energy efficient they can sell excess electricity back to the utility.

. . .

“It’s a new kind of grant-making,” said Jonathan Greenblatt, an entrepreneur who sold his company, Ethos Water, to Starbucks and became a senior adviser to the X Prize Foundation. “It’s a mode that encourages experimentation rather than prescribing solutions. It sets the stage for innovation and dynamism that the grantor can’t anticipate.”

. . .

Cash prizes to induce innovation are not new. Peter Diamandis, the 46-year-old aeronautical engineer and physician who founded the X Prize Foundation, said he was inspired by the $25,000 aviation prize offered in 1919 by a New York hotelier, Raymond Orteig, to the first person to fly nonstop from New York to Paris. The prize went, of course, to Charles Lindbergh, whose grandson, Erik Lindbergh, is on the X Prize Foundation board.

In the same spirit, “We asked ourselves, how do we demonstrate the technology and stimulate market interest?” said Dan Reicher, director of climate and energy initiatives at Google.org. “How do we advance the technology around plug-ins? The usual way is to quietly go about looking at investment opportunities, make investments and have some impact. We decided to take a different route, a public request for investment proposals. We wanted to look beyond the usual players, bring attention to a critical area and catalyze competition and innovation.”

. . .

The X Prize Foundation announced the new competitions at the Clinton Global Initiative, a conference organized by former President Bill Clinton and held in September in New York.

“Think of this,” Mr. Clinton said at the time. “Twelve prizes in areas designed to break barriers to human health, have children live longer, solve all these education problems and do it in the most cost-effective way. This is the most amazing idea to me, trying to unleash entrepreneurship in the public interest.”

For the full story, see: 

KEITH SCHNEIDER.  "Win Fabulous Prizes, All in the Name of Innovation."  The New York Times, Giving Special Section  (Sun., November 12, 2007):  33.

(Note:  ellipses added.)

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   "The U.P.S. hub at Louisville International Airport covers four million square feet."  Source of caption and photo:  online version of the NYT article quoted and cited below. 

(p. C1)  LOUISVILLE, Ky. — Worldport, the United Parcel Service hub at the airport here, gives new meaning to the phrase “hub of activity.” On a peak night, workers have less than four hours to process more than a million packages from at least 100 planes and probably 160 trucks.

Yes, the ubiquitous brown trucks, with their brown-clad drivers, are the face that U.P.S. presents to the world. But increasingly, it is the researchers at its Atlanta headquarters, its technology center in Mahwah, N.J., and its huge four-million-square-foot Louisville hub who are asking the questions that will drive the company’s future.

What if the package contains medicine that could turn from palliative to poison if the temperature wavers? What if it is moving from Bangkok to Bangor and back to Bangkok, and if customs rules differ on each end? And what if the package is going to a big company that insists on receiving all its packages, no matter who ships them, at the same time each day?

Increasingly, it is the search for high-tech answers to such questions that is occupying the entire package delivery industry. U.P.S. and FedEx are each pumping more than $1 billion a year into research, while also looking for new ways to cut costs. “When you handle millions of packages, a minute’s delay can cost a fortune,” said John Kartsonas, an analyst with Citigroup. “Information technology has become essential.”

Customers of both FedEx and U.P.S. can now print out shipping labels that are easily scannable by computers. Meteorologists at both companies routinely outguess official Weather Service forecasts. And both are working with the Federal Aviation Administration to improve air safety and scheduling.

U.P.S. specifically is collaborating with the F.A.A. on a system — formally, Automatic Dependent Surveillance Broadcast, but usually just called A.D.S.B. — that may (p. C4) make conventional radar obsolete. “We want to make A.D.S.B. the backbone of our future air traffic system,” said Vincent Capezzuto, the manager of the program for the F.A.A.

The research at U.P.S. is paying off. Last year, it cut 28 million miles from truck routes — saving roughly three million gallons of fuel — in good part by mapping routes that minimize left turns. This year, U.P.S. began offering customers a self-service system for redirecting packages that are en route.

 And now the U.P.S. researchers are working on sensors that can track temperatures of packages, on software that can make customs checks more uniform worldwide and on scheduling processes that accommodate the needs of recipients as well as shippers. “Recipients do not pay U.P.S., but they sure influence which carriers their suppliers use,” David A. Barnes, the chief information officer, said.

For the full story, see: 

CLAUDIA H. DEUTSCH.  "U.P.S. Embraces High-Tech Delivery Methods."  The New York Times (Thurs., July 12, 2007):  C1 & C4.

    U.P.S. employee Jeffrey Sarver tracks the weather.  Source of photo:  online version of the NYT article quoted and cited above.

Posted by Art Diamond at 1:01 AM | Permalink | Comments (0)

   Source of graph:  online version of the WSJ article cited below. 

The key to business success is usually thought to be to beat the competition.  An alternative sketched by Clayton Christensen, and in the book Blue Ocean Strategy, is to do something that the competition isn't doing.  As a once-famous, old-time baseball player once said:  "Hit 'em where they ain't." 

MILPITAS, Calif. -- Erik Soule had been waiting 15 months for this moment. The semiconductor engineer was about to launch a new chip, and he needed his pricing approved. In a conference room at Linear Technology Corp., Mr. Soule anxiously explained why his amplifier chip is so advanced that it should sell for $1.68, a third more than its rivals.

His bosses' reaction: Charge even more. The chip is 30 times better than the competition, they asserted, and high-end customers will crave it on any terms. Why not boost the $1.68 list price by 10 cents? Mr. Soule was nervous. "I can live with that," he guardedly replied, "but what does that accomplish?"

"It's a dime!" declared Linear's chairman and founder, Robert Swanson. "And those dimes add up."

For many U.S. companies, such exuberant pricing power vanished long ago. They now struggle to deliver more at lower prices, amid intense global competition. But Linear has built one of the world's strongest profit fortresses by staying strictly at the fringes, where competition is low and margins are still high.

Away from the semiconductor industry's frenzied center stage, this midsize company makes 7,500 arcane, unglamorous products that solve real-world problems for a long list of customers. Instead of the better-known digital chips that power the brains of the world's computers and bring in 85% of the industry's revenue, Linear makes so-called analog chips that are too cheap for customers to haggle over, but perform chores too important to ignore.

Pick apart a medical ultrasound machine, a hybrid car battery or thousands of other costly devices, and somewhere inside is a Linear chip that helps monitor power consumption or guard against voltage surges. It's a backwater of high tech well-suited to Linear's engineer-driven culture, where quirky developers shop for old part testers at flea markets to keep costs down. Many of Linear's chips cost less than 50 cents to build and sell for three to four times as much, but customers seldom complain about the markup.

Linear made a 39% profit on its $1.1 billion in sales in calendar 2006 -- more than five times the average for U.S. industrial companies. Linear easily outpaced even the tech industry's best-known profit powerhouses, Microsoft Corp. and Google Inc., which earned profits of 26% and 24% of sales for the same period.

For the full story, see: 

GEORGE ANDERS.  "PRICING POWER; In a Tech Backwater, A Profit Fortress Rises; Maker of Arcane Chips Earns Better Margins Than Google, Microsoft."  The Wall Street Journal   (Tues., July 10, 2007):  A1 & A19. 

   CEO of Linear Technology Corp.  Source of image:  online version of the WSJ article cited above.

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     "Eric von Hippel of M.I.T., left, and Dr. Nathaniel Sims, with hospital devices Dr. Sims has modified. Mr. von Hippel says users can improve on products."  Source of caption and photo:  online version of the NYT article cited below.

Some innovation is done by the devoted for free.  But in his books, and in the article excerpted below, I think von Hippel puts too little emphasis on the entrepreneur and the entrepreneur's profit motive, as drivers of innovation. 

One example is the Moveable Type free program that underlies this, and many other blogs.  It is often described as one of the best blog platforms, but it is hard to use for a non-techie, kludgey, and very limited in some obvious ways.  For example, there apparently is no way that I can make comments to the most recent 10 entries visible on the main blog page.  And there is only limited backup capabilities.  And the spell-checker does not have "blog" in its dictionary, and asks me if I really meant to type "bog."

You can bet that if Moveable Type was produced for profit, they would have provided users these obvious capabilities.  And I would rather pay for a more capable program, rather than get a less capable program for free.

(p. 5) DR. NATHANIEL SIMS, an anesthesiologist at Massachusetts General Hospital, has figured out a few ways to help save patients’ lives. 

In doing so, he also represents a significant untapped vein of innovation for companies.

Dr. Sims has picked up more than 10 patents for medical devices over his career. He ginned up a way to more easily shuttle around the dozen or more monitors and drug-delivery devices attached to any cardiac patient after surgery, with a device known around the hospital as the “Nat Rack.”

. . .

What Dr. Sims did is called user-driven innovation by Eric von Hippel, a professor at the Massachusetts Institute of Technology’s Sloan School of Management. Mr. von Hippel is the leading advocate of the value of letting users of products modify them or improve them, because they may come up with changes that manufacturers never considered. He thinks that this could help companies develop products more quickly and inexpensively than with their internal design teams.

“It could drive manufacturers out of the design space,” Mr. von Hippel says.

It is a difficult idea for research and development departments to accept, but one of his studies found that 82 percent of new capabilities for scientific instruments like electron microscopes were developed by users.

. . .

One problem with the user-innovation model is that it can run into intellectual property rights protections.  . . .

. . .

. . . , Mr. von Hippel’s ideas are up against more conventional forms of user-aided design, such as sending anthropologists to study how people use products in their daily lives. Companies then translate their research into new designs.

Even some of Mr. von Hippel’s acolytes remain cautious. “A lot of this is still in the category of, ‘You could imagine this working out really well,’ ” says Saul T. Griffith, who as an M.I.T. engineering student was part of a group of kite-surfers who developed products for their sport that have since become commercialized. Mr. von Hippel wrote about Mr. Griffith in his 2005 book, “Democratizing Innovation.”

For the full story, see:

MICHAEL FITZGERALD.  "Prototype How to Improve It? Ask Those Who Use It."  The New York Times, Section 3  (Sun., March 25, 2007):  5.

(Note:  ellipses added.) 

von Hippel has two main books in which he defends his user-driven innovation ideas:

von Hippel, Eric. The Sources of Innovation. New York:  Oxford University Press, 1988.

von Hippel, Eric. Democratizing Innovation. Cambridge, MA:  MIT Press, 2005.

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   Source of graph:  online version of the WSJ article cited below.

Clayton Christensen, in a series of books, has highlighted why it is difficult for a successful incumbent to prepare a successor for its own winning product.  The Motorola case below is another example.

Note, though, that Motorola's failure is not the understandable one of failing to prepare what Christensen calls a "disruptive innovation."  If the story below is right, it is a case of the less understandable failure to continue to deliver with what Christensen calls "sustaining innovation."

(p. A1)  A year ago, Motorola Inc. appeared headed for a third straight year of rich profits under Chief Executive Ed Zander, driven by its hit cellphone the Razr. "A lot of you are always asking what is after the Razr," Mr. Zander said in an April 2006 conference call after another quarter of 30%-plus growth. "I say more Razrs."

But behind the scenes, Motorola was working furiously to get a successor phone to market by the second half of 2006, according to people familiar with the matter. When it failed to do so, profit margins on handsets narrowed and the company swung to a loss. Key executives left. And as the stock slid, activist investor Carl Icahn built up a position and began campaigning for a board seat to address what he called Motorola's "operational problems."

Motorola's travails illustrate the risks for a company that rides high with a big consumer hit. Amid its success with the Razr, it fell behind on developing a phone with the next generation of technology. Missing a beat is especially hazardous in cellphones, where it can take two to three years to develop a new line.

. . .

(p. A14)  As the Razr grew hot, some former designers and engineers say Motorola repeated mistakes it had made a decade earlier with another big hit, the compact flip-top phone known as the StarTAC. That phone was a huge seller, but it also was an analog phone, and its popularity blinded the company to an industry shift to digital technology. Similarly, while Motorola was selling countless Razrs, competitors were hard at work on more sophisticated products for 3G networks.

Motorola put engineers and designers who could have been working on new products on the Razr and its derivatives, some former executives say. "All resources went to feeding the beast," says a former Motorola designer. "Suddenly, you created this thing that requires a lot of energy and attention." Other former executives dispute that the focus on the Razr diverted work from other products and contend Motorola was right to ride the still-popular Razr as long as possible.

For the full story, see: 

CHRISTOPHER RHOADS and LI YUAN.  "DROPPED CALL; How Motorola Fell A Giant Step Behind; As It Milked Thin Phone, Rivals Sneaked Ahead On the Next Generation."   The Wall Street Journal  (Fri., April 27, 2007):  A1  & A14. 

(Note:  ellipsis added.)

The most complete source of Christensen's theory and examples is:  

Christensen, Clayton M., and Michael E. Raynor. The Innovator's Solution: Creating and Sustaining Successful Growth. Boston, MA: Harvard Business School Press, 2003.

  Motorola CEO.  Source of image:  online version of the WSJ article cited above.

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   Source of graph:  online version of the NYT article cited below.

(p. C1)  SAN FRANCISCO, June 17 — Town Hall, one of the busiest restaurants in this food-crazed city, seems the very model of old-fashioned dining. Patrons who arrive to claim their reserved seats are greeted by a hostess who consults a piece of paper with the day’s reservations and leads her guests to the appointed table.  

But upstairs, in the restaurant’s office, a different scene is playing out. In a veritable mission-control setting, a reservationist answers eight phone lines while seated in front of two computers that log reservations and hold an archive of past and future electronic bookings.

The software also reveals the idiosyncrasies of thousands of guests. The restaurant staff knows in advance, for instance, that a regular always insists on a table under a particular piece of artwork. They know about another person’s request for kosher food — but only when dining in certain company. And there is the guest so reliably late that staff members know to add 45 minutes to the reservation time.

After decades of relying on telephones to book tables, and piles of index cards — or a maitre d’hotel’s memory — to collect information about diners and their quirks, the restaurant business has finally gone unabashedly high-tech.

Technology may not make it any easier for diners to get a reservation at the most sought-after spots, like the French Laundry in Yountville, Calif., or Babbo in New York City. But the perseverance of a San Francisco-based company called OpenTable, which has come to dominate the business of online restaurant reservations, is making it much easier for restaurants to manage reservations and improve customer service.

. . .

(p. C5)  Making a reservation through OpenTable costs the diner nothing. And it reduces the inconvenience. Say you want a table on short notice at a busy Manhattan restaurant — Danny Meyer’s Union Square Cafe. Placing a phone call there usually requires calling during business hours, enduring loud jazz for hold music, and talking with a reservationist for a while before finding an acceptable time. OpenTable might give you the same results, but it will do the work in 10 seconds.

. . .

Many of the restaurants discovered that they had to surrender to the automation because their popularity suffered if they did not.

“It was a long, long time before that was proven,” said Bill Gurley, a Silicon Valley venture capitalist whose company, Benchmark, has invested $21.6 million in OpenTable over the years.

It took three years for OpenTable to seat its one-millionth diner. But now, the company seats two million diners every month. And Zagat, the restaurant rating service, has adopted OpenTable for reservations made through its site, zagat.com

For the full story, see: 

KATIE HAFNER.  "Restaurant Reservations Go Online."  The New York Times   (Mon., June 18, 2007):  C1 & C5.

(Note:  ellipses added.)

   "Doug Washington, left, and Mitchell Rosenthal are partners in Salt House in San Francisco, one of 7,000 restaurants using OpenTable."  Source of caption and photo:  online version of the NYT article cited above.

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   Source of graphic:  online verion of the NYT article cited below.

(p. C1)  Jeffrey Taft is a road warrior in the global high-technology services economy, and his work shows why there are limits to the number of skilled jobs that can be shipped abroad in the Internet age.

Each Monday, Mr. Taft awakes before dawn at his home in Canonsburg, Pa., heads for the Pittsburgh airport and flies to Houston for the week.

He is one of dozens of I.B.M. services employees from around the country who are working with a Texas utility, CenterPoint Energy, to install computerized electric meters, sensors and software in a “smart grid” project to improve service and conserve energy.

Mr. Taft, 51, is an engineer fluent in programming languages and experienced in the utility business. Much of his work, he says, involves being a translator between the different vernaculars and cultures of computing and electric power, as he oversees the design and building of software tailored for utilities. “It takes a tremendous amount of face-to-face work,” he said.

What he does, in short, cannot be done overseas. But some of the programming work can be, so I.B.M. employees in India are also on the utility project team.

The trick for companies like I.B.M. is to figure out what work to do where, and, more important, to keep bringing in the kind of higher-end work that needs to be done in this country, competing on the basis of specialized expertise and not on price alone.

The debate continues over how much skilled work in the vast service sector of the American economy can migrate offshore to lower-cost nations like India. Estimates of the number of services jobs potentially at (p. C4) risk, by economists and research organizations, range widely from a few million to more than 40 million, which is about a third of total employment in services.

Jobs in technology services may be particularly vulnerable because computer programming can be described in math-based rules that are then sent over the Internet to anywhere there are skilled workers. Already, a significant amount of basic computer programming work has gone offshore to fast-growing Indian outsourcing companies like Infosys, Wipro and Tata Consultancy Services.

To compete, companies like I.B.M. have to move up the economic ladder to do more complicated work, as do entire Western economies and individual workers. “Once you start moving up the occupational chains, the work is not as rules-based,” said Frank Levy, a labor economist at the Massachusetts Institute of Technology. “People are doing more custom work that varies case by case.”

In the field of technology services, Mr. Levy said, the essential skill is “often a lot more about business knowledge than it is about software technology — and it’s a lot harder to ship that kind of work overseas.”

For the full story, see: 

STEVE LOHR.  "At I.B.M., a Smarter Way to Outsource."  The New York Times   (Thurs., July 5, 2007):  C1 & C4. 

Levy has co-authored a book that is relevant to the example and issues raised in the article.  See:

Levy, Frank, and Richard J. Murnane.  The New Division of Labor: How Computers Are Creating the Next Job Market.  Princeton, NJ:  Princeton University Press, 2004.

   IBM engineer Jeffrey Taft (blue shirt) has "local" knowledge of the connection between computer programming and the electric utility business.  Here he is on-site in Houston at the offices of CenterPoint Energy.  Source of graphic:  online verion of the NYT article cited above.

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  Source of graphic:  online version of the WSJ article quoted, and cited, below. 

(p. B1)  In a move that could mark the beginning of a nuclear-power revival, a New Jersey-based energy company today plans to submit an application to build and operate two new reactors. The request, the first submitted to the Nuclear Regulatory Commission in 31 years, comes from an unlikely source: NRG Energy Inc., a company that has never before built a nuclear plant.

The application -- for a two-reactor addition to the company's existing South Texas nuclear station -- could offer the first full test of the nuclear agency's new licensing process, which has been under development since the 1980s. The new process allows companies to submit a single application for a construction permit and conditional operating license, eliminating the risk that a firm could build a plant but not be allowed to run it.

. . .

(p. B2)  . . . , the industry has regained momentum, partly because other forms of power generation have continued to show significant flaws. Coal-fired plants undermine efforts to combat global warming. Many natural-gas-fired plants rely on a fuel with volatile prices. And renewable energy mostly comes from intermittent forces like wind, rain and sunlight.

This first application comes from a somewhat unlikely source; NRG is a so-called "merchant generator," a company that makes electricity and sells it on the open market. NRG has never built a nuclear plant, and because it doesn't own a utility, has no ratepayers to whom it could bill the estimated $5.5 billion to $6 billion expense.

"We're like the uncola," says David Crane, NRG chief executive in Princeton, N.J.

. . .

So far, it appears merchant generators think Texas provides the most promising market. Deregulation in that state has resulted in a sharp run up in wholesale power prices since 2004. A recent decision by Dallas-based TXU to abandon efforts to build eight coal-fired plants could result in shrinking electricity reserves in the coming years, creating an environment receptive to operators looking to bring large units online and sell such units' full output.

For the full story, see: 

REBECCA SMITH.  "Nuclear Energy's Second Act? Bid to Build Two New Reactors In Texas May Mark Resurgence; NRC Gears Up for Many More."  The Wall Street Journal  (Tues., September 25, 2007):  B1 & B2.

(Note:  ellipses added.)

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In discussing the process of creative destruction, Schumpeter mentioned both product and process innovations.  By far the greater attention has been given to product innovations.  But maybe process innovations deserve more attention than they have received:

Snazzy products are the stuff of legends, romanticized by “early adopters” and skewered by neo-Luddites. Yet while these products bring glory to companies, novel processes are often more important in keeping the cash registers ringing.

. . .

Consider the question of Google’s greatest business secret. Is it the algorithms behind its search tools? Or is it the way it organizes vast clusters of computers around the globe to answer queries so quickly? Perhaps predictably, Google won’t disclose the number of computers deployed in its vast information network (though outsiders speculate that the network has at least 450,000 computers).

I believe that the physical network is Google’s “secret sauce,” its premier competitive advantage. While a brilliant lone wolf can conceive of a dazzling algorithm, only a superwealthy and well-managed organization can run what is arguably the most valuable computer network on the planet. Without the computer network, Google is nothing.

Eric E. Schmidt, Google’s chief executive, appears to agree. Last year he declared, “We believe we get tremendous competitive advantage by essentially building our own infrastructures.”

Process innovations like Google’s computer network are often invisible to the public, and impossible to duplicate by rivals. Yet successful companies realize that maintaining competitive advantage depends heavily on sustaining process innovations.

For the full commentary, see: 

G. PASCAL ZACHARY. "PING; The Unsung Heroes Who Move Products Forward." The New York Times, SundayBusiness Section (Sun., September 30, 2007): 3.

(Note:  ellipsis added.)

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   The Berkeley Pit was once a copper mine, and now holds a lake of toxic waste.  Source of photo:  online version of the NYT article quoted and cited below.

Here are a few paragraphs from a fascinating story about a couple of people who seem to be practicing what Taleb is preaching in The Black Swan:

BUTTE, Mont. — Death sits on the east side of this city, a 40-billion-gallon pit filled with corrosive water the color of a scab. On the opposite side sits the small laboratory of Don and Andrea Stierle, whose stacks of plastic Petri dishes are smeared with organisms pulled from the pit. Early tests indicate that some of those organisms may help produce the next generation of cancer drugs.

From death’s soup, the Stierles hope to coax life.

“I love the idea of looking at toxic waste and finding something of value,” said Ms. Stierle, 52, a chemistry researcher at Montana Tech of the University of Montana.

For decades, scientists assumed that nothing could live in the Berkeley Pit, a hole 1,780 feet deep and a mile and a half wide that was one of the world’s largest copper mines until 1982, when the Atlantic Richfield Company suspended work there. The pit filled with water that turned as acidic as vinegar, laced with high concentrations of arsenic, aluminum, cadmium and zinc.

. . .

Mr. Stierle is a tenured professor at Montana Tech, but his wife gets paid only for teaching an occasional class or if there is a grant to finance her research. From 1996 to 2001 they applied for dozens of grants, but received only rejection letters. So they financed their own research, using personal savings and $12,000 in annual patent royalty payments. In 2001, they won a six-year, $800,000 grant from the United States Geological Survey.

“Their work is considered a very high-risk approach,” said Matthew D. Kane, a program director at the National Science Foundation. “It takes a long time to get funding, and some luck to find active compounds.”

Unlike scientists at large research universities, who commonly teach only one class a year and employ graduate students to run their laboratories, Mr. Stierle teaches four classes each semester at a college with 2,000 undergraduates and no major research presence.

. . .

The couple said they were negotiating privately with a pharmaceutical company to test some of the compounds they have discovered and possibly turn them into drugs. As they wait, they open another Mason jar filled with murky pit water, draw a sample and return to work.

“The pit very easily could have been a complete waste of time,” Mr. Stierle said. “We just had luck and worked our butts off. We take that first walk into the dark.”

For the full story, see:

CHRISTOPHER MAAG.  "In the Battle Against Cancer, Researchers Find Hope in a Toxic Wasteland."   The New York Times  (Tues., October 9, 2007):  A21.

(Note:  ellipses added.)

   In the photo immediately above, Don and Andrea Steirle work in their lab.  The map to the left shows the location of the Berkeley Pit.  Source of the photo and map:  online version of the NYT article quoted and cited above.

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  "Micheline Kapinga of Kamponde, Congo, uses a cellphone on the only site in the village that is sometimes able to capture a signal."  Source of caption and photo:  online version of the NYT article cited below. 

I AM just back from Tanzania in East Africa.

In the mornings, disregarding the protests of the armed guards at my lodge near Arusha, I jogged along muddy footpaths. After the heavy rains, and under a low, misty sky, the fields looked as ruined as a battlefield. Very poor farmers and their children stared curiously at me as I passed.

In the afternoons, I attended the TEDGlobal 2007 conference, held by the Technology, Entertainment and Design organization in the modern Ngurdoto Mountain Lodge. The contrast between the two experiences troubled me.

TED conferences, mostly held in Monterey, Calif., are invitation-only affairs, are attended by the aristocracy of Silicon Valley and are known for their adventurousness in drawing together wildly disparate trends in technology, business and the arts.

On this occasion, Bono, the Irish rock star and champion of African causes, had persuaded the conference’s organizer, Chris Anderson, to invite the usual crowd, as well as African entrepreneurs, activists, health care professionals and artists to this tropical, leafy region midway between the Serengeti Plain and Mount Kilimanjaro.

. . .

At least one of the African attendees of the conference was representative of the kind of technological entrepreneurialism that the show advocated.

Alieu Conteh, the chairman of Vodacom Congo, was born in Gambia, in West Africa, 55 years ago and moved to Congo in 1981. For years, he was a successful coffee buyer and exporter.

Congo is about the size of Western Europe and has an estimated population of 65 million people. It is one of the least-developed nations in the world, with less than 300 miles of roads, most of them in poor condition.

In 1997, Mr. Conteh recalled in an interview, he heard Laurent D. Kabila, then the country’s president, deliver a speech in which he called upon his countrymen to rebuild Congo’s infrastructure after the 30-year dictatorship of Mobutu Sese Seko. Mr. Conteh, who had no experience in telecommunications, said he was inspired. He decided to build the nation’s first GSM (Global System for Mobile communications) digital network.

At the time, according to Mr. Conteh, fewer than 10,000 people living in Congo — mainly business people, foreigners and government employees — had mobile handsets. They paid $7 to $10 a minute to make a call, using an older technology. Less than 15,000 homes had a telephone landline.

Mr. Conteh said he went, cap in hand, to the minister of communications to ask for the country’s first GSM license. In January 1998 he got it — but he first had to pay the government a license fee of $100,000. Over the years, and with little explanation, he said, the government, which is often terribly short of money, increased the license fee, first to $400,000, then $2 million.

For more of the commentary, see: 

JASON PONTIN.  "SLIPSTREAM; What Does Africa Need Most: Technology or Aid?"  The New York Times, Section 3  (Sun., June 17, 2007):  3. 

(Note:  ellipsis added.)

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   Source of graphic:  online version of the WSJ article excerpted and cited below.

Among the hottest Web sites of the past few years were job-search sites such as CareerBuilder.com and Monster.com. Helped by lavish advertising, they became household names. Newspapers, eager to tap the fast-growing online-ad market, teamed up with them.

Now, the hottest names in online recruitment are increasingly specialized job sites. That poses a threat to the growth prospects of the broad-based online job boards and their newspaper partners, analysts said.

In August, the number of unique visitors to CareerBuilder -- which is jointly owned by Gannett, Tribune, McClatchy and Microsoft -- dropped 2% to 20.2 million, while Monster.com's traffic rose 4% to 16.3 million visitors.

By contrast, technology-focused Dice.com saw its traffic jump 34% to 998,000. At Healthcaresource.com, which posts health-care jobs, traffic rose 36%. 

For the full story, see: 

EMILY STEEL.  "ADVERTISING; Job-Search Sites Face a Nimble Threat Online Boards Become Specialized, Threatening Web-Print Partnerships."   The Wall Street Journal  (Tues., October 9, 2007):  B10.

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   Source of graph:  online version of the NYT article cited below.

(p. 1)  SAN FRANCISCO, June 16 — Has online retailing entered the Dot Calm era?

Since the inception of the Web, online commerce has enjoyed hypergrowth, with annual sales increasing more than 25 percent over all, and far more rapidly in many categories. But in the last year, growth has slowed sharply in major sectors like books, tickets and office supplies.

Growth in online sales has also dropped dramatically in diverse categories like health and beauty products, computer peripherals and pet supplies. Analysts say it is a turning point and growth will continue to slow through the decade.

. . .

Forrester Research, a market research company, projects that online book sales will rise 11 percent this (p. 16) year, compared with nearly 40 percent last year. Apparel sales, which increased 61 percent last year, are expected to slow to 21 percent. And sales of pet supplies are on pace to rise 30 percent this year after climbing 81 percent last year.

Growth rates for online sales are slowing down in numerous other segments as well, including appliances, sporting goods, auto parts, computer peripherals, and even music and videos. Forrester says that sales growth is pulling back in 18 of the 24 categories it measures.

. . .

The turning point comes as most adult Americans, and many of their children, are already shopping online.  That means Internet stores are not getting a flurry of new shoppers to spur the kind of growth tht the industry is accustomed to.  There is a boom in the number of foreigners coming online, but shipping items overseas can limit that market as a source of growth. 

. . .

John Morgan, an economics professor from the Haas School of Business at the University of California, Berkeley, said he expected online commerce to continue to increase, partly because it remains less than 1 percent of the overall economy.  “There’s still a lot of head room for people to grow,” he said.

For the full story, see: 

MATT RICHTEL and BOB TEDESCHI. "As Some Grow Weary of Web, Online Sales Lose Momentum."  The New York Times, Section 1  (Sun., June 17, 2007):  1 & 16. 

(Note:  ellipses were added.  The online version of the article had the slightlly different title:  "Online Sales Lose Steam as Buyers Grow Web-Weary."  The bold has been added to indicate a couple of sentences in the above excerpts, that were in the print version, but had been dropped from the online version.)

    Source of graph:  online version of the NYT article cited above.

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  David Warsh prepares to speak as Sandra Peart introduces him at the HES meetings at George Mason.  Source of photo:  me. 

David Warsh in his plenary address to the History of Economics Society on June 9, 2007, recounted a version of the account that he gives in his 2006 book Knowledge and the Wealth of Nations. (A key part of this story was also told in an article in the Sunday magazine section of The New York Times.)

Here I concentrate on the plenary lecture presentation.

Warsh said that he is the first to give Romer his due; that Romer has managed to alienate the economists both at Chicago and at MIT. (Well, maybe, but Tom Friedman sure gives Romer a lot of attention and praise in his best-selling The World is Flat.) Warsh also said that he (Warsh) has been accused of writing a hagiography of Romer.

Warsh identifies the key contribution of Romer as being that he identifies the key properties of knowledge, namely that it is nonrivalrous and nonexcludible. He claims that Romer was the first to see this, and so is responsible for beginning the crucial field of the economics of knowledge.

Further, Warsh claims that the economics profession only achieved this insight when Romer found a way to incorporate knowledge in his formal models.

This story, Warsh says, is a triumph of formalism; only through formalism could such an important advance have been made.

At this point in the presentation, I became rather annoyed---I had my hand up during most of the question session, but Warsh chose not to call on me.  (In fairness, I was seated on his far left, though at the front, so it is possible that he did not see me.)

What I told Warsh afterwards was that the lesson from this episode is the exact opposite of the one he claims---it is not an example of the triumph of formalism, but rather an example of the shame of formalism.

Long before Romer, others had pointed out the nonrivalry and nonexcludibility of knowledge. E.g., Arrow briefly in a famous essay (1962), and Harry Johnson at greater length in an obscure essay (1972).

The requirement that serious knowledge requires formalization before it is taken seriously, meant that economists ignored for several decades, what had been nonformally known. It is to the shame of formalism that for decades useful issues were ignored.

And even more strongly, to say that Romer is responsible for founding the economics of knowledge is to add insult to injury to the economists who had actually founded this field: economists such as Richard Nelson, Nathan Rosenberg, Zvi Griliches and Edwin Mansfield.

Not only was their work largely ignored for decades, but a leading advocate and exemplar of the formalist methodology responsible for the ignorance, is himself given credit for their achievements.

The reference to Warsh's book, is:

Warsh, David. Knowledge and the Wealth of Nations: A Story of Economic Discovery. New York: W. W. Norton & Co., 2006.

For further information on the founders of the economics of science and technology, one could consult:

   Genentech CEO Dr. Arthur D. Levinson.  Source of image:  online version of the WSJ article cited below.

(p. B1)  WSJ: You have multiple blockbuster biotech drugs on the market and more on the way. In such an uncertain business, how do you manage scientists to achieve that kind of success?

Dr. Levinson: We are first and foremost committed to doing great science. If a drug can't be the first in class or the best in class, we're just not interested. We're not looking to achieve incremental advances or extend patents or do X, Y, Z unless it is going to really matter for patients. That allows us to bring in phenomenal scientists and encourage them to do the basic and translational research.

We decided 15 years ago that we would be committing (p. B2) to oncology, which at the time for us was new. We are now the leading producer of anticancer drugs in the United States. We took a lot of risks. In many cases, those risks paid off. We are now also in immunology. Again, the role of management here is to set the broad direction and then hire absolutely the best scientists and bring them in and say, 'Do your stuff.'

For the full interview, see:

MARILYN CHASE. The Wall Street Journal "How Genentech Wins At Blockbuster Drugs CEO to Critics of Prices: 'Give Me a Break'."   The Wall Street Journal  (Tues., June 5, 2007):  B1 & B2.

    Source of graph:  online version of the WSJ article cited above.

Posted by Art Diamond at 1:01 AM | Permalink | Comments (0)

The excerpt below is from a WSJ summary of an article from the Summer issue of the journal Strategy + Business.

Linux's success isn't as egalitarian as it seems, says Mr. Carr. In 1997, Mr. Raymond praised Linux's founder, Linus Torvalds, for realizing that "given enough eyeballs, all [software] bugs are shallow." However, Linux has always had a central authority -- originally, Mr. Torvalds himself; later, a small group of engineers -- that synthesized the work of the volunteers.

Similarly, the expansiveness of Wikipedia's entries lies in its contributors' wide range of interests. However, the encyclopedia is slowly putting together a management team to identify and improve poorly written articles and correct imbalances like the one where the "Flintstones" entry is twice as long as the one on "Homer."

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