July 3, 2009

Berkshire BYD Technology Bet Based on Munger's View of BYD Manager



MungerCharlie2009-06-19.jpg











"BOOK VALUE: Berkshire Hathaway's Charles Munger reads businesses well -- and, as a bibliophile, he goes through several books a week." Source of caricature and caption: online version of the WSJ article quoted and cited below.



At a Berkshire Hathaway annual meeting a few years ago, I remember hearing Warren Buffett say that he stays away from technology stocks because he does not know how to judge which technologies are likely to succeed in the long-run. So I was a bit puzzled by the news that Berkshire Hathaway was investing in BYD, a Chinese company producing an electric car.

The passages quoted below may partially solve the puzzle: the investment in BYD was pushed by Charlie Munger and David Sokol, and was based more on a judgment about the quality of BYD's management, than the prospects for BYD's technology.


(p. C1) Mr. Munger's views have pushed Berkshire into some surprising directions. Several years ago, Mr. Munger learned of an obscure Chinese maker of batteries and automobiles called BYD Inc., which hopes to create a cheap, functional electric car.

A Chinese tech company is nothing like the shoe and underwear makers Berkshire had been buying. But Mr. Munger was enthusiastic, less about the technology than about Wang Chuanfu, who runs BYD. Mr. Wang, Mr. Munger says, is "likely to be one of the most important business people who ever lived."

Mr. Buffett was skeptical at first. But Mr. Munger persisted. David Sokol, chairman of Berkshire utility MidAmerican Energy Holdings Co., paid a visit to BYD's factory in China and agreed with Mr. Munger's assessment. Last year, MidAmerican paid $230 million for a 10% stake in BYD.

"BYD was Charlie's idea," Mr. Buffett said. "When he encounters genius and sees it operating in a practical way, he gets blown away."




For the full story, see:

SCOTT PATTERSON. "Here's the Story on Berkshire's Munger." Wall Street Journal (Fri., MAY 1, 2009): C1 & C3.






July 2, 2009

If the Medici Had Not Intervened, Galileo "Would Have Been Killed"



(p. D7) The Franklin Institute and its aspiring blockbuster, "Galileo, the Medici & the Age of Astronomy," are something of an odd couple -- a circumstance explained, like so much else, by history.


. . .

Meanwhile, the exhibition leaves provocative questions -- about the nexus of church and state, as well as science and faith -- unanswered. If Galileo was still a court favorite, and science was so revered in Florence, why weren't the powerful dukes able to prevent his 1633 trial, heresy conviction, and sentence of house arrest?

Galileo's patrons did, in fact, intervene on his behalf, Filippo Camerota, vice director of the Institute and Museum for the History of Science and one of the exhibition curators, said in an interview. "If the Medici were not there," Mr. Camerota said, "he would have been killed." Good to know.



For the full commentary, see:

JULIA M. KLEIN. "Exhibition; What Galileo Saw." Wall Street Journal (Tues., APRIL 28, 2009): D7.

(Note: ellipsis added.)





July 1, 2009

RIP Marjorie Grene, Who Helped Polanyi with Personal Knowledge



GreneMarjorie2009-06-10.jpg











"Marjorie Grene in 2003." Source of photo and caption: online version of the NYT obituary quoted and cited below.



The NYT reported, in the obituary quoted below, that philosopher Marjorie Grene died on March 16, 2009, at the age of 93.

Although I studied philosophy at the University of Chicago, my time there did not overlap with Marjorie Grene's and I don't believe that I ever met her, or ever even heard her speak (though I did occasionally walk past her former husband David Grene, on my way to talk to Stephen Toulmin).

I am increasingly appreciating Michael Polanyi's book Personal Knowledge in which he introduced his view of what he called "tacit knowledge." In particular, I am coming to believe that tacit knowledge is very important in understanding the role and importance of the entrepreneur.

So if Marjorie Grene was crucial to Personal Knowledge, as is indicated in the obituary quoted below, then she is deserving of serious consideration, and high regard.


(p. 23) In Chicago, she had met Michael Polanyi, a distinguished physical chemist turned philosopher; she ended up helping him research and develop his important book "Personal Knowledge" (1958). The book proposed a far more nuanced, personal idea of knowledge, and directly addressed approaches to science.

"There is hardly a page that has not benefited from her criticism," Dr. Polanyi wrote in his acknowledgments. "She has a share in anything I may have achieved here."


. . .


Her sense of humor sparkled when she was asked about being the first woman to have an edition of the Library of Living Philosophers devoted to her -- Volume 29 in 2002. Previous honorees included Bertrand Russell and Einstein. "I thought they must be looking desperately for a woman," Dr. Grene said.



For the full obituary, see:

DOUGLAS MARTIN. "Marjorie Grene, a Leading Philosopher of Biology, Is Dead at 98." The New York Times, First Section (Sun., March 29, 2009): 23.

(Note: ellipsis added.)


The reference for the Polanyi book, is:

Polanyi, Michael. Personal Knowledge: Towards a Post-Critical Philosophy. Chicago: University Of Chicago Press, 1958.





June 30, 2009

"Entrepreneurs Must Be Allowed to Retain the Wealth They Create"



(p. 305) Entrepreneurs seek money chiefly for positive reasons: to perform their central role in economic growth. Just as a sociologist needs free time and access to libraries and research aides, and a scientist needs a laboratory and assistants, and a doctor needs power to prescribe medicine and perform surgery--just as intellectuals need freedom to write and publish--capitalists need economic freedom and access to capital to perform their role in launching and financing enterprise. Entrepreneurs must be allowed to retain the wealth they create because only they, collec- (p. 306) tively, can possibly know who to give it to--how to invest it productively among the millions of existing businesses and the innumerable visions of new enterprise in the world economy.


Source:

Gilder, George. Recapturing the Spirit of Enterprise: Updated for the 1990s. updated ed. New York: ICS Press, 1992.






June 29, 2009

To Cure Fatal Diseases We Need More Finanical Incentives and Fewer F.D.A. Restrictions



ThompsonJoshuaAndSons.jpg








"JOSHUA THOMPSON with his sons, Wyatt and Jordan, after his diagnosis, top, and before, with his wife, Joy, and Wyatt." Source of the photos and caption: online version of the NYT article quoted and cited below.












(p. 1) VIRGINIA BEACH -- As Lou Gehrig's disease sapped Joshua Thompson of his ability to move and speak last fall, he consistently summoned one question from within the prison of his own body. "Iplex," he asked, in a whisper that pierced his mother's heart. "When?"

Iplex had never been tested in people with amyotrophic lateral sclerosis, the formal name for the fatal disease that had struck Joshua, 34, in late 2006. Developed for a different condition and banished from the market by a patent dispute, it was not for sale to the public anywhere in the world.

But Kathy Thompson had vowed to get it for her son. On the Internet, she had found enthusiastic reviews from A.L.S. patients who had finagled a prescription for Iplex when it was available, along with speculation by leading researchers as to why it might slow the progressive paralysis that marks the disease. And for months, as she begged and bullied biotechnology companies, members of Congress, Italian doctors and federal drug regulators, she answered Joshua the same way:

"Soon," she said. "Soon."

At a time when terminally ill patients have more access to medical research than ever before, and perhaps a deeper conviction in its ability to cure them, many are campaigning for the chance to be treated with drugs whose safety and effectiveness is not yet known.


. . .


(p. 19) "Josh's sadness is unbearable," his mother wrote one night in her journal, nearly a year after her son's diagnosis.

Unexpected encouragement came in a Mother's Day note from her ex-husband. "You have given me some peace of mind that all potential options for Josh are being researched and acted upon," Bruce wrote. "Thank you."

Kathy's boyfriend accompanied her to Insmed's headquarters in Richmond, Va., offering to raise several million dollars to underwrite a compassionate use program for Iplex in the United States with A.L.S. patients. But the couple came away with a new understanding: F.D.A. regulations, they were told, prohibit any company from profiting on compassionate use. Even if Insmed could wriggle free of restrictions in the patent agreement, there was little financial incentive for it to invest in making the drug solely for compassionate use by A.L.S. patients.


. . .


On Jan. 16, when Dr. Werwath called to tell her the application had been rejected, she stood up in disbelief.

"How could that be?" she asked, dazed.

Kathy's friend Mrs. Reimers had received a call with the same news.

"He said they had safety concerns," Mrs. Reimers said. "This for a drug that was approved for children!"

"Safety," Kathy repeated. "And what, exactly, is safe about A.L.S.?"

Appealing an F.D.A. Denial

Before the F.D.A.'s decision, Kathy had spared little thought for any broader meaning of her quest for Joshua. But when she met with Richard A. Samp, a lawyer with the Washington Legal Foundation a week later, her outrage went beyond her son, and beyond Iplex.

"The F.D.A. is supposed to protect American citizens," Kathy fumed over an iced tea in Williamsburg, Va. "How does denying dying patients access to this drug serve the common good?"

Mr. Samp had handled a lawsuit by a patient advocacy group, the Abigail Alliance, that had sought to establish a constitutional right for terminally ill patients to use experimental drugs. In the case, which the group had lost on appeal in 2007, the F.D.A. claimed that it granted "nearly all" requests for compassionate use.

They would first make an administrative appeal, Mr. Samp told Kathy, asserting that the F.D.A. had violated its own guidelines. If that failed, they could pursue litigation that might allow them to raise the constitutional question again in a federal court in Virginia.


. . .


Kathy was pouring milk for her cereal on the morning of March 10 when Dr. Werwath's number flashed on her phone. The F.D.A. had just reversed itself, he said.

Before she could take a breath, Senator Mark Warner's office called. E-mail bleeped in as the news seeped out.

In the weeks after the appeal, Kathy learned, the F.D.A. had reached out to Insmed. The agency had persuaded the company to run a clinical trial for Iplex with several dozen A.L.S. patients, and permitted it to recoup the hefty costs directly from participants. In the trial, some of the participants would get a placebo. That way, the F.D.A. wrote on its Web site, the next wave of A.L.S. patients would learn whether the drug was in fact beneficial or harmful.

But for now, the agency had ruled, Joshua and 12 other patients would be given Iplex outside of the trial, on a compassionate use basis, if they agreed to read all the data about the risks.



For the full version of a very long story, see:

AMY HARMON. "Months to Live; Fighting for a Last Chance at Life; One Family's Tenacious Campaign for Access to an Unproven Drug." The New York Times, First Section (Sun., May 17, 2009): 1, 18-19.

(Note: ellipses added.)




ThompsonJoshuaIplexInjection2009-06-10.jpg"IN MARCH, Joshua Thompson received his first Iplex injection, from Dr. David L. Werwath. Thereafter Joshua's wife, Joy, left, and mother, Kathy, took over the daily duties." Source of the photo and caption: online version of the NYT article quoted and cited above.





June 28, 2009

"Don't Kill the Goose"



(p. A11) I think there are two major but not fully formed or fully articulated fears among thinking Americans right now, and the deliberate obscurity of official language only intensifies those fears.

The first is that Mr. Obama's government, in all its flurry of activism, may kill the goose that laid the golden egg. This is as dreadful and obvious a cliché as they come, but too bad, it's what people fear. They see the spending plans and tax plans, the regulation and reform hunger, the energy proposals and health-care ambitions, and they--we--wonder if the men and women doing all this, working in their separate and discrete areas, are being overseen by anyone saying, "By the way, don't kill the goose."

The goose of course is the big, messy, spirited, inspiring, and sometimes in some respects damaging but on the whole brilliant and productive wealth-generator known as the free-market capitalist system. People do want things cleaned up and needed regulations instituted, and they don't mind at all if the very wealthy are more heavily taxed, but they greatly fear a goose killing. Economic freedom in all its chaos and disorder has kept us rich for 200 years, and allowed us as a nation to be generous and strong at home and in the world. But the goose can be killed--by carelessness, hostility, incrementalism, paralysis, and by no one saying, "Don't kill the goose."



For the full commentary, see:

PEGGY NOONAN. "What's Elevated, Health-Care Provider? Economy of language would be good for the economy." Wall Street Journal (Sat., MAY 15, 2009): A11.






June 27, 2009

"Flock of Intellectuals" Called Eiffel Tower "Dizzily Ridiculous"



EiffelTower2009-06-19.jpg














"Gustave Eiffel's creation turns 120 years old on May 15." Source of photo and caption: online version of the WSJ article quoted and cited below.


(p. W12) The tower is so beloved that few today remember the storm of vitriol, mockery and lawsuits provoked by its selection as the startling centerpiece of the 1889 Paris Exposition Universelle. (One of the losing entries was a gigantic working guillotine!) Even as Eiffel was breaking ground by the Seine River in February 1887, 47 of France's greatest names decried in a letter to Le Temps the "odious column of bolted metal." What person of good taste, this flock of intellectuals asked, could endure the thought of this "dizzily ridiculous tower dominating Paris like a black and gigantic factory chimney, crushing [all] beneath its barbarous mass"? The revered painters Ernest Meissonier and William-Adolphe Bouguereau, writers Guy de Maupassant and Alexandre Dumas fils, composer Charles Gounod and architect Charles Garnier all signed this epistolary call to arms, stating that "the Eiffel Tower, which even commercial America would not have, is without a doubt the dishonor of Paris."

Gustave Eiffel, a self-made millionaire whose firm constructed much-admired bridges all over the world, happily twitted his critics: "They begin by declaring that my tower is not French. It is big enough and clumsy enough for the English or Americans, but it is not our style, they say. We are more occupied by little artistic bibelots. . . . Why should we not show the world what we can do in the way of great engineering projects?"



For the full commentary, see:

JILL JONNES. "MASTERPIECE; 'Odious Column' of Metal; The Eiffel Tower wasn't always a beloved icon." Wall Street Journal (Tues., MAY 9, 2009): W12.

(Note: ellipsis in original.)





June 26, 2009

There's Still Space in Diamond's Fall Seminar on the Economics of Entrepreneurship at the University of Nebraska at Omaha



EntrepreneurshipPosterRevised.jpg




June 25, 2009

Environmentalists Lay Guilt on Rafael for His New Set of Legos



BatkerRafaelLegos2009-06-10.jpg"David Batker with his son Rafael de la Torre Batker, 9, who worried it might hurt the environment if he bought a new set of Legos." Source of photo and caption: online version of the NYT article quoted and cited below.


(p. A1) The thick-lined drawings of the Earth, a factory and a house, meant to convey the cycle of human consumption, are straightforward and child-friendly. So are the pictures of dark puffs of factory smoke and an outlined skull and crossbones, representing polluting chemicals floating in the air.

Which is one reason "The Story of Stuff," a 20-minute video about the effects of human consumption, has become a sleeper hit in classrooms across the nation.


. . .


. . . many children who watch it take it to heart: riding in the car one day with his parents in Tacoma, Wash., Rafael de la Torre Batker, 9, was worried about whether it would be bad for the planet if he got a new set of Legos.

"When driving by a big-box store, you could see he was struggling with it," his father, David Batker, said. But then Rafael said, "It's O.K. if I have Legos because I'm going to keep them for a very long time," Mr. Batker recalled.


. . .


(p. A12) "There was not one positive thing about capitalism in the whole thing," Mr. Zuber said.

Corporations, for example, are portrayed as a bloated person sporting a top hat and with a dollar sign etched on its front.



For the full story, see:

LESLIE KAUFMAN. " In Schools, a Cautionary Video About America and Its 'Stuff'In Silt, Bangladesh Sees Potential Shield Against Sea Level Rise." The New York Times (Mon., May 11, 2009): A1 & A12.

(Note: ellipses added; the online version of the title is: "A Cautionary Video About America's 'Stuff'.")



EnvironmentalistVideoCapture.jpg"A section of the video on toxic chemicals and production." Source of image and caption: online version of the NYT article quoted and cited above.





June 24, 2009

"Clear Relationship in Rice Farming Between Effort and Reward"



(p. 236) What redeemed the life of a rice farmer, however, was the nature of that work. It was a lot like the garment work done by the Jewish immigrants to New York. It was meaningful. First of all, there is a clear relationship in rice farming between effort and reward. The harder you work a rice field, the more it yields. Second, it's complex work. The rice farmer isn't simply planting in the spring and harvesting in the fall. He or she effectively runs a small business, juggling a family workforce, hedging uncertainty through seed selection, building and managing a sophisticated irrigation system, and coordinating the complicated process of harvesting the first crop while simultaneously preparing the second crop.

And, most of all, it's autonomous. The peasants of Europe worked essentially as low-paid slaves of an aristocratic landlord, with little control over their own destinies. But China and Japan never developed that kind of oppressive feudal system, because feudalism simply can't work in a rice economy. Growing rice is too complicated and intricate for a system that requires farmers to be coerced and bullied into going out into the fields each morning. By the fourteenth and fifteenth centuries, landlords in central and Southern China had an almost completely hands-off relationship with their tenants: they would collect a fixed rent and let farmers go about their business.

"The thing about wet-rice farming is, not only do you (p. 237) need phenomenal amounts of labor, but it's very exacting," says the historian Kenneth Pomerantz. "You have to care. It really matters that the field is perfectly leveled before you flood it. Getting it close to level but not quite right makes a big difference in terms of your yield. It really matters that the water is in the fields for just the right amount of time. There's a big difference between lining up the seedlings at exactly the right distance and doing it sloppily. It's not like you put the corn in the ground in mid-March and as long as rain comes by the end of the month, you're okay. You're controlling all the inputs in a very direct way. And when you have something that requires that much care, the overlord has to have a system that gives the actual laborer some set of incentives, where if the harvest comes out well, the farmer gets a bigger share. That's why you get fixed rents, where the landlord says, I get twenty bushels, regardless of the harvest, and if it's really good, you get the extra. It's a crop that doesn't do very well with something like slavery or wage labor. It would just be too easy to leave the gate that controls the irrigation water open a few seconds too long and there goes your field."




Source:

Gladwell, Malcolm. Outliers: The Story of Success. New York, NY: Little, Brown, and Co., 2008.

(Note: italics in original.)








Eight Most Recent Comments:



Badger said:

Nice story - unlike the many others that tracked what we did, yours was the best article I read. We had all kinds of abuse and scaremongering from crazies - when inaccurate versions of what we were doing to squirrels founds it's way into the blogosphere. Love your blog Art - keep up the great work. The squirrel pate was actually a damn fine pate - alas we have no more and dont plan to make any more. More trouble than it's worth perhaps. Maybe a badger pate would go down well (might taste a little too gamey?!) Your thoughts and future recipe ideas would be appreciated! jeremy@patchwork-pate.co.uk



ptg said:

Spending an inordinate amount of time sleeping is a symptom of depression. Not that the French have any reason to be depressed.



ratan das vaishnav said:

Respactable PM Sir & a great economist good day and time I am ratan Das Vaishnav an Indian want to be economist but I dont know what I have to do I know that it is not a proper way to consult with you But as well as I know I haven't your personal info so I use this way to you. I am a poor student who just passed class 12th and join ajob but my all n one only one aim to be economist so please ignor the way of asking such question & reply me. I'll want to economist like you. It will be your gratitute to give me little response. bhagwan aapko lambi umar de. thanking you your faithfully



abvillian said:

ptg ( is it for poltergeist ) I gather, you superimpose inteligence to belief? Is that right? Is it conditionally or unconditionally? Another one, science and belief are exclusive? Right? Conditionally or unconditionally? Do you consider yourself to be a scientist? To me you sound more like a compilation artist, in the sense of a medieval cleric scripture re-writer. And you dare to draw parallel with Galileo? Shameless! No, you're not an interpreter, but simply putting it a scripture maintenance worker. That is exactly the title you may get, if you coexist in the field of basic science. Now, I will make a statement. Belief has everything to do with science, and with the process of creative thinking. Everything. Creative thinking and belief do not exclude each other, quite contrary. Popper? This is what Mr. Popper says in The Logic of Scientific Discovery: "My belief is that the resolution of conflicts between hypotheses and observations can only be a matter of the collective judgment of scientists, in each individual case.[13]" It is not his ratio or intelligence that is telling him the above, it is his "belief". I think that you immaturely decided to chose sides, while the truth is elsewhere.



ptg said:

Will the American experiment come to suffer the same disrepute as phlogiston theory?

Rust never sleeps.



ptg said:

How these scientists can promote this idiocy with straight faces is beyond my comprehension. I guess some folks will do anything for 'funding'.



jbeck said:

I think that a fuller version of the quote is found in Blum, "From The Morgenthau Diaries -- Years of Urgency 1938-1941" at pp. 24-25 The portions ommitted by Folsom are in brackets: We have tried spending money. We are spending more money than we have ever spent before and it does not work. And I have just none interest, and if I am wrong . . . somebody else can have my job. I want to see this country prosperous. I want to see people get a job, I want to see people get enough to eat. We have never made good on our promises. . . . [We have said we would give everybody a job that wanted it. We have never taken care of the people . . . . there are four million that don't have that much income. We have never done anything for them . . . We have never begun to tax the people in this country the way they should be . . . . People who have it should pay. . . . It's never a good year to have a tax bill, but I think it's a darn good year to begin to balance the budget. . . . the biggest deterrent of all . . . is that the country does not know when the end is in sight and this unbalancing of the budget . . . that's what frightens people.] I say after eight years of this administration we have just as much unemployment as when we started . . . . And an enormous debt to boot!



Mark Laniak said:

Very interesting indeed. I am in the scrap metal recycling business and in the past year or two the rules and regulations of Harris County and then now the City of Houston have tightened CONSIDERABLY! It has gotten harder for the average Joe to just pick up material and turn it in to the scrap yards for processing. Lets face it, in Houston, most of the laborers are illegal alien Mexican immigrants (I really tried to phrase that in the most appropriate way, really) and they are the ones left having to deal with the demolition of buildings and cleanups. The trouble is that most of them do not have id's and therefore ship the material out of the city to less regulated areas. I know, I've had to turn away all that business at my scrap yard. Well, hope it sheds a light on another perspective. Blah, blah enough. :-)





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