December 2008 – artdiamondblog.com

European Commission Now Lets Consumers Buy Ugly Vegetables

(p. A6) BRUSSELS — Misshapen fruit and vegetables won a reprieve on Wednesday from the European Union as it scrapped rules banning overly curved, extra knobbly or oddly shaped produce from supermarket shelves.

Ending regulations on the size and shape of 26 types of fruit and vegetables, the European authorities killed off restrictions that had become synonymous with bureaucratic meddling.
The rising cost of commodities also persuaded the European Commission that there was no point in throwing away food just because it looked strange.
As of July, when the changes go into force, these standards for the 26 products, as varied as peas and plums, will disappear. European shoppers will then be able to choose their produce whatever its appearance.

For the full story, see:
STEPHEN CASTLE. “Europe Relaxes Rules on Sale of Ugly Fruits and Vegetables.” The New York Times (Thurs., November 13, 2008): A6.

Supporters of Whaling Industry Objected to Light from Gas

In the process of creative destruction, the industry that is being destroyed often seeks to protect itself from the new innovation:

(p. 45) In England, objectors to gaslight argued that it undercut the whaling industry.

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

Taleb Practices What He Preaches, and Does Well

Taleb on left; Spitznagel on right. Source of images: online version of the WSJ article quoted and cited below.

(p. C1) For most of October, it seemed nearly everything that could go wrong with the markets did. But the rout turned into a jackpot for author and investor Nassim Nicholas Taleb.

Mr. Taleb last year published “The Black Swan,” a best-selling book about the impact of extreme events on the world and the financial markets. He also helped start a hedge fund, Universa Investments L.P., which bases many of its strategies on themes in the book, including how to reap big rewards in a sharp market downturn. Like October’s.
Separate funds in Universa’s so-called Black Swan Protection Protocol were up by a range of 65% to 115% in October, according to a person close to the fund. “We’re discovering the fragility of the financial system,” said Mr. Taleb, who says he expects market volatility to continue as more hedge funds run into trouble.
A professor of mathematical finance at New York University, Mr. Taleb believes investors often ignore the risk of extreme moves in the market, especially when times are good and volatility is low, as it was for several years leading up to the current turmoil. “Black swan” alludes to the belief, once widespread, that all swans are white — a notion that was proven false when European explorers discovered black swans in Australia. A black-swan event is something that is highly unexpected.
Assets under management at Universa have neared $2 billion since the fund launched early last year with $300 million under management. While Mr. Taleb frequently consults with Universa’s traders, the Santa Monica, Calif., fund is owned and managed by Mark Spitznagel, who worked for several years in the 1990s as a pit trader on the Chicago Board of Trade.

For the full story, see:
SCOTT PATTERSON. “October Pain Was ‘Black Swan’ Gain.” The Wall Street Journal (Mon., NOVEMBER 3, 2008): C1 & C3.

For my enthusiastic review of the Taleb book, see:

Diamond, Arthur M., Jr. “Review of the Black Swan: The Impact of the Highly Improbable.” Journal of Scientific Exploration 22, no. 3 (Fall 2008): 419-22.

“Four G’s Needed for Success: Geduld, Geschick, Glück, Geld”

One of Domagk’s predecessors, in goal and method, was Paul Ehrlich, who was a leader in the search for the Zuberkugeln (magic bullet) against disease causing organisms. He systematized the trial and error method, and pursued dyes as promising chemicals that might be modified to attach themselves to the intruders. But he never quite found a magic bullet:

(p. 82) Ehrlich announced to the world that he had found a cure for sleeping sickness. But he spoke too soon. Number 418, also, proved too toxic for general use. He and his chemists resumed the search.

Ehrlich said his method consisted basically of “examining and sweating”—and his coworkers joked that Ehrlich examined while they sweated. There was another motto attributed to Ehrlich’s lab, the list of “Four Gs” needed for success: Geduld, Geschick, Glück, Geld—patience, skill, luck, and money.

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: do not confuse the “Paul Ehrlich” discussed above, with the modern environmentalist “Paul Ehrlich” who is best known for losing his bet with Julian Simon.)

How to Run a Business in Nebraska

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

(p. A15) How exactly did Jack get to be so wild? It appears — and even the redoubtable Mr. Rottenberg acknowledges that the documentation is often sparse — that Jack got into the freight-hauling business and one thing led to another, including stage coaching, supervising the mails and helping to run the Pony Express. In his heyday, Slade was the boss of the Express’s fabled Sweetwater division, said to be the most dangerous stretch of the overland route, from Nebraska to Salt Lake City, 500 hard miles of hard country, hard men, hard weather and unfriendly Indians. One chronicler noted about Slade that “from Fort Kearney, west, he was feared a great deal more than the Almighty.”

Freight hauling was not the space program. A man could get into this line of work easily if he had the physical stamina and the nerve. But it was dangerous work. A man might run into some rough customers. Perhaps the most celebrated of these, in Slade’s case, was an ornery French-Canadian named Jules Beni, with whom he had a long-standing feud. Jules eventually shot Slade, in 1860, riddling him with bullets and leaving him for dead. But Slade was made of tougher stuff and would settle the score. A year later he killed Beni and carried the dead man’s ears around as a souvenir, pulling them out for display from time to time to the alarm of fellow saloon patrons. A previous account of Slade’s life was in fact titled “An Ear in His Pocket.” Now that’s a bad man!

For the full review, see:
CHRISTOPHER CORBETT. “BOOKShelf; A Desperado Rides Again.” The Wall Street Journal (Tues., NOVEMBER 11, 2008): A15.

Reference to the book being reviewed:
Rottenberg, Dan. Death of a Gunfighter. Westholme Publishing, 2008.

Eastman Was a Self-Financed Entrepreneur

Mark Casson has argued that the more original the entrepreneur’s innovation, the more likely he will need to finance all, or a large part, of it himself. To the extent that this is true, it represents an important argument for allowing the accumulation of wealth (and thereby an argument against substantial personal income, and inheritance, taxes.)
Here is an example, consistent with Casson’s argument, of a self-financed entrepreneur:

(p. 36) The idea of loading film into a camera, snapping the picture and then sending the film to a store to be processed was the brainchild of an American from Rochester, New York, called George Eastman. One day in 1879, at the bank where he had worked since leaving school at the age of fourteen, he didn’t get the promotion he was expecting. So he left and used his savings to set himself up as a “Maker and Dealer in Photographic Supplies.” At this time, picture taking was a messy, cumbersome and expensive business, involving glass-late negatives, buckets of chemicals an monster wooden cameras. When Eastman had finished his experiments with the process, his slogan promised, “You press the button. We do the rest.”

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

A True Christmas Story of Hope and Justice

Gerhard Domagk. Source of photo: http://www.nndb.com/people/744/000128360/

Gerhard Domagk spent most of his adult life in a focused, tireless effort to find the first cure for a bacterial infection. Finally, his laboratory discovered a sulfa drug they called “Prontosil,” that seemed effective against strep and some other infections. Domagk published his first preliminary results on the drug in February 1935 (see Hager, p. 164). An increasing number of doctors began testing the drug on their desperate patients.
Life is not always unfair:

(p. 181) In early December 1935, just after the French published the discovery that pure sulfa was the active ingredient in Prontosil, Domagk’s six-year-old daughter, Hildegarde, suffered a bad accident. She was making a Christmas decoration in their house when she decided that she needed help threading a needle. She was on her way downstairs to find her mother, carrying the needle and thread, when she fell. The needle was driven into her hand blunt end first, breaking off against a carpal bone. She was taken to the local clinic and the needle was surgically removed, but a few days later, her hand started swelling. After the stitches were removed, her temperature rose and kept rising. An abscess formed at the surgical site. She had a wound infection. The staff at the clinic tried opening and draining the abscess. When it became reinfected, they opened it again. Then again. The infection started moving up her arm. “Her general state and the abscess worsened to such a point that we became seriously concerned,” Domagk wrote later. “More surgery was impossible.” She was falling in and out of consciousness. The surgeons were talking about amputating her arm. Once the blood tests showed that the invading germ was strep, Domagk went to his laboratory and pocketed a supply of Prontosil tablets, returned to her hospital room, put the red tablets in her mouth himself, and made certain that she swallowed. Then he waited. A day later her temperature continued to rise. He gave her more tablets. No improvement. On day (p. 182) three he gave her more, a large dose, but there was still no improvement. Her situation was growing desperate, so he pulled out all the stops, on day four giving her more Prontosil tablets, then two large injections of Prontosil soluble. Finally her temperature started to drop. He gave her more tablets. After a week of treatment, her temperature finally returned to normal. The infection had been stopped. By Christmas she was able to celebrate the holidays with her family.

Most Scientists’ Lives Are “Like Those of Anxious Middle Managers”

(p. 64) The truth is that scientists come in all types, just like everyone else. They are people, not pop paradigms. They worry about how they are going to pay their bills, and they get envious of the researchers who got the credit they should have gotten. They compete for grants and complain when those grants are awarded to someone else. They focus on prestige and work for advancement and usually do what their bosses (or, less directly, granting agencies) say. Most scientists, as the great British molecular biologist J. D. Bernal noted back in the 1930s, live lives more like those of anxious middle managers than great visionaries.

Governments Still Give Sugar’s Fanjuls a Sweet Deal

“As Florida buys U.S. Sugar, company land could go on the block. The Fanjul family, with sugar operations like this one in Palm Beach County, is waiting.” Source of caption and photo: online version of the NYT article quoted and cited below.

Many years ago, CBS’s “Sixty Minutes” program ran a wonderful Steve Kroft piece (called, I think, “A Sweet Deal”) exposing how protectionist federal government sugar import quotas, benefit the extraordinarily wealthy and powerful Fanjul family, at the expense of ordinary consumers.
Nothing has changed:

(p. 1) IN June, Gov. Charlie Crist announced that Florida would buy one of the state’s two big sugar enterprises, the United States Sugar Corporation. He billed the purchase as a “jump-start” in the environmental restoration of the Everglades, which cane growers are accused of polluting with fertilizer runoff.

But in the end, the $1.7 billion buyout, scheduled to be completed in early 2009, may also prove to be a financial boon to the state’s remaining sugar superpower, Florida Crystals.
One of the country’s wealthiest families, the Fanjuls of Palm Beach, controls Florida Crystals and today touches virtually every aspect of the sugar trade in the United States.
. . .
“This is going to be a really good deal for the Fanjuls,” says Dexter Lehtinen, a former federal prosecutor whose 1988 lawsuit against the state led to a settlement instituting tough clean water standards. “The state embarked on a nonachievable goal, and now in desperation to wrap up some package, they’re going to have to give access to Florida Crystals on favorable terms.”
Others, like makers of candy and cereal, say the (p. 9) Fanjuls already control too much of the sugar trade. They want to buy sugar cheap and say the Fanjuls have long charmed Congress into legislating price supports that keep it expensive.
Free-trade advocates also complain, saying that a private business has used the shelter of the federal sugar program, created in the Depression to nurture struggling farmers, to increase its corporate hammerlock.
“These people have been absolutely extorting consumers for decades, and the only reason they’re existing in the first place is, they were able to get sweet deals from governments that were propping them up,” says Sallie James, a trade policy analyst with the libertarian Cato Institute, referring to Florida Crystals and U.S. Sugar.

For the full story, see:
MARY WILLIAMS WALSH. “Florida Deal for Everglades May Help Big Sugar.” The New York Times, SundayBusiness Section (Sun., September 14, 2008): 1 & 9.
(Note: ellipsis added.)

“Three leaders of the Fanjul family: Pepe Jr., left; J. Pepe, center; and Alfonso Jr., called Alfy. After Fidel Castro chased the family from Cuba, it rebuilt its sugar empire in the United States.” Source of caption and photo: online version of the NYT article quoted and cited above.

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

Resilience is Key to Surviving Disasters (and to Successful Entrepreneurship)

I believe that resilience is a key characteristic of successful entrepreneurs. Amanda Ripley has some plausible and useful comments on resilience in the passages quoted below.

(p. 91) Resilience is a precious skill. People who have it tend to also have three underlying advantages: a belief that they can influence life events; a tendency to find meaningful purpose in life’s turmoil; and a conviction that they can learn from both positive and negative experiences. These beliefs act as a sort of buffer, cushioning the blow of any given disaster. Dangers seem more manageable to these people, and they perform better as a result. . . .

. . . A healthy, proactive worldview should logically lead to resilience. But it’s the kind of unsatisfying answer that begs another question. If this worldview leads to resilience, well what leads to the worldview?

(p. 92) The answer is not what we might expect. Resilient people aren’t necessarily yoga-practicing Buddhists. One thing that they have in abundance is confidence. As we saw in the chapter on fear, confidence—that comes from realistic rehearsal or even laughter—soothes the more disruptive effects of extreme fear. A few recent studies have found that people who are unrealistically confident tend to fare spectacularly well in disasters. Psychologists call these people “self-enhancers,” but you and I would probably call them arrogant. These are people who think more highly of themselves than other people think of them. They tend to come off as annoying and self-absorbed. In a way, they might be better adapted to crises than they are to real life.

Source:
Ripley, Amanda. The Unthinkable: Who Survives When Disaster Strikes – and Why. New York: Crown Publishers, 2008.
(Note: ellipses added.)

James Burke (and Art Diamond) on the Importance of Serendipity

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.