January 2011 – artdiamondblog.com

Feds Protect Us from Freshly Baked Cookies

“Schools like Omaha’s Masters Elementary, which held a recent holiday bake sale, count on the profits from selling cupcakes, caramel corn and other goodies to raise money for field trips and other activities.” Source of caption and photo: online version of the Omaha World-Herald article quoted and cited below.

(p. 1A) A business club at Millard West High School peddles freshly baked cookies, raking in $15,000 annually to help send students to national conferences.

At Omaha’s Masters Elementary, cupcakes, fudge and other bake-sale treats raise $500 for field trips, rain jackets for the safety patrol and playground equipment.

But the federal government could slam the brakes on those brownies and lower the boom on the lemon bars.
A child nutrition bill passed recently by Congress gives a federal agency the power to limit the frequency of school bake sales and other school-sponsored fundraisers that sell unhealthy food.
To some, the bake sale provision makes about as much sense as leaving the marshmallows out of Rice Krispies treats.
It maybe makes sense for the federal government to monitor the quality of ground beef, eggs and milk sold in grocery stores. But caramel corn and snicker doodles whipped up by parents for school bake sales?
“Aren’t there more important (p. 2A) things for them to be worried about?” Sandy Hatcher, president of Masters’ parent organization, said of the federal government.

For the full story, see:
MICHAEL O’CONNOR. “Putting the brakes on bake sales; New federal rules on frequency during school day may affect fundraising.” Omaha World-Herald (Sun., December 12, 2010): 1A-2A.

Carlyle (and Rosen) on Arkwright

(p. 236) The greatest hero-worshipper of them all, Thomas Carlyle. described Arkwright as

A plain, almost gross, bag-checked, potbellied, much enduring, much inventing man and barber… . French Revolutions were a-brewing: to resist the same in any measure, imperial Kaisers were impotent without the cotton and cloth of England, and it was this man that had to give England the power of cotton…. It is said ideas produce revolutions, and truly they do; not spiritual ideas only, but even mechanical. In this clanging clashing universal Sword-dance which the European world now dances for the last half-century, Voltaire is but one choragus [leader of a movement, from the old Greek word for the sponsor of a chorus] where Richard Arkwright is another.

. . .
Arkwright was not a great inven-(p. 237)tor, but he was a visionary, who saw, better than any man alive, how to convert useful knowledge into cotton apparel and ultimately into wealth: for himself, and for Britain.

Source:
Rosen, William. The Most Powerful Idea in the World: A Story of Steam, Industry, and Invention. New York: Random House, 2010.
(Note: internal ellipses in original; ellipsis between paragraphs added.)

“It Isn’t the Consumers’ Job to Know What They Want”

“Steven P. Jobs has played a significant role in a string of successful products at Apple, including the iPad, shown above, which was introduced last year.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. B1) Shortly before the iPad tablet went on sale last year, Steven P. Jobs showed off Apple’s latest creation to a small group of journalists. One asked what consumer and market research Apple had done to guide the development of the new product.

“None,” Mr. Jobs replied. “It isn’t the consumers’ job to know what they want.”
For years, and across a career, knowing what consumers want has been the self-appointed task of Mr. Jobs, Apple’s charismatic co-founder. Though he has not always been right, his string of successes at Apple is uncanny. His biggest user-pleasing hits include the Macintosh, the iMac, iBook, iPod, iPhone and iPad.
But as he takes a medical leave of absence, announced on Monday, the question is: Without him at the helm, can Apple continue its streak of innovation, particularly in an industry where rapid-fire product cycles can make today’s leader tomorrow’s laggard?
. . .
(p. B4) With the iPad tablet, Apple jump-started a product category. But with the iPod (a music and media player) and iPhone (smartphone), Apple moved into markets with many millions of users using rival products, but he gave consumers a much improved experience.
“These are seeing-around-the-corner innovations,” said John Kao, an innovation consultant to corporations and governments. “Steve Jobs is totally tuned into what consumers want. But these are not the kind of breakthroughs that market research, where you are asking people’s opinions, really help you make.”
Regis McKenna, a Silicon Valley investor and marketing consultant, said employees at Apple stores provide the company with a powerful window into user habits and needs, even if it is not conventional market research.
“Steve visits the Apple store in Palo Alto frequently,” said Mr. McKenna, a former consultant to Apple.
. . .
In a conversation years ago, Mr. Jobs said he was disturbed when he heard young entrepreneurs in Silicon Valley use the term “exit strategy” — a quick, lucrative sale of a start-up. It was a small ambition, Mr. Jobs said, instead of trying to build companies that last for decades, if not a century or more.
That was a sentiment, Mr. Jobs said, that he shared with his sometime luncheon companion, Andrew S. Grove, then the chief executive of Intel.
“There are builders and traders,” Mr. Grove said on Tuesday. “Steve Jobs is a builder.”

For the full story, see:

STEVE LOHR. “The Missing Tastemaker?” The New York Times (Weds., JANUARY 19, 2011): B1 & B4.
(Note: ellipses added.)
(Note: the online version of the article is dated January 18, 2011 and has the title “Can Apple Find More Hits Without Its Tastemaker?.”)

Patent Processing Delay Increases to 3.82 Years

Economists who study patents, sometimes have found that outside of pharmaceuticals, patents seldom have strong positive effects on innovation. That has led some economists and policy advisers to conclude that the patent system has more costs than benefits. But another possibility, supported by facts in the article quoted below, is that the patent system is badly designed and badly implemented.
So rather than abandon the patent system, maybe we should reform its rules, and allow the Patent Office to keep all of its fees to use for hiring and training more staff to process patents.

(p. 4A) MILWAUKEE — A year and a half after President Barack Obama appointed an IBM Corp. executive to fix the U.S. Patent and Trademark Office, it still cannot keep up with its workload, continuing to battle the effects of years of congressional raids on its funding.
. . .
Also unchanged is a bureaucracy that publishes entire patent applications online 18 months after they are filed, whether they have been acted upon or not. That puts American ingenuity up for grabs, free to anyone with an Internet connection.
. . .
Applications now languish so long that technologies can become obsolete before a patent is ruled upon.
Consider:
>> The agency took 3.82 years on average for each patent it issued last year, up from 3.66 years in 2009 and 3.47 in 2008. Many took years longer.
>> The total number of applications awaiting a final decision remains stuck at 1.22 million, nearly unchanged from levels of the past three years.
>> The agency imposed a hiring freeze in 2009 and lost examiners last year, and has been unable to replace them because of budget constraints.
In 2010, the Patent Office collected $53 million in fees that it wasn’t allowed to keep, according to limits imposed by Congress.
Delays by the Patent Office often inflict the deepest damage on garage inventors and start-up companies that may have no other assets than their unprotected ideas.
. . .
“A lot of companies actually die awaiting their patent because the Patent Office is so slow,” said Michel, the former patent court judge.

For the full story, see:
MILWAUKEE JOURNAL SENTINEL. “Patent agency more harm than help for many inventors; Though more than 1 million applications are stalled, they’re already posted online.” Omaha World-Herald (Sun., January 23, 2011): 4A.
(Note: ellipses added.)

Stranded Chinese Drivers Curse Government and Buy Noodles from Entrepreneurs

“Enterprising residents of Hetaocun sold food to stranded travelers at a markup.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. A7) HETAOCUN, China — Compared with some of the more spectacular recent traffic jams in China, among them a 60-mile snarl last summer that paralyzed a major artery outside Beijing for two weeks, the thousands of travelers who spent the night trapped on a snow-coated highway in southwest Guizhou Province on Monday did not even warrant a mention in the local news media.
. . .
Stranded drivers chain-smoked, stomped their feet against the chill and cursed the government for failing to come to their rescue. As the night wore on, fuel lines froze and cellphone batteries died.
The residents of Hetaocun, however, saw the unmoving necklace of taillights from their mountain village and got entrepreneurial. They roused children from their beds, loaded boxes of instant noodles into baskets and began hawking their staples to a captive clientele. The 500 percent markup did not appear to dent sales.
“It rarely snows here, so this is a good thing,” said Yi Zhonggui, 42, as he wove past stalled vehicles with his wife and 4-year-old daughter lugging thermoses of hot water.
As the supply of noodles ran low, residents began gathering up the walnuts that give the village its name. In between cries of “walnuts, walnuts,” salesmen like Chen Xianneng obliged the desperate with snippets of news from the front, even if the information was based on hearsay.

For the full story, see:
ANDREW JACOBS. “Hetaocun Journal; As Traffic Backs Up, Villagers See Opportunity.” The New York Times (Weds., JANUARY 19, 2011): A7.
(Note: ellipsis added.)
(Note: the online version of the article is dated January 18, 2011 and has the title “Hetaocun Journal; In China, Traffic Jam Benefits Enterprising Villagers.”)

REVISE THIS ONE: Patents Needed to Provide Money for “the Many Fruitless Experiments”

(p. 234) . . . ; together, Watt and Arkwright wrote a manuscript entitled “Heads of a Bill to explain and amend the laws relative to Letters Patent and grants of privileges for new inventions,” essentially a reworking of Coke’s Statute of 1623 that had created England’s first patent law. In addition to its policy prescriptions, which were largely an unsuccessful argument against the requirement that patent applications be (p. 235) as specific as possible, the manuscript offered a remarkable insight into Watt’s perspective on the life of the inventor, who should, in Watt’s own (perhaps inadvertently revealing) words, “be considered an Infant, who cannot guard his own Rights”:

An engineer’s life without patent is not worthwhile . . . few men of ingenuity make fortunes without suffering to think seriously whether the article he manufactures might, or might not, be Improved. The man of ingenuity in order to succeed must seclude himself from Society, he must devote the whole powers of his mind to that one object, he must persevere in spite of the many fruitless experiments he makes, and he must apply money to the expenses of these experiments, which strict Prudence would dedicate to other purposes. By seclusion from the world he becomes ignorant of its manners, and unable to grapple with the more artful tradesman, who has applied the powers of his mind, not to the improvement of the commodity he deals in, but to the means of buying cheap and selling dear, or to the still less laudable purpose of oppressing such ingenious workmen as their ill fate may have thrown into his power.

Source:
Rosen, William. The Most Powerful Idea in the World: A Story of Steam, Industry, and Invention. New York: Random House, 2010.
(Note: the second ellipsis and the italics in original; the first ellipsis added.)

Cuban Government Gets Billions by “Exporting” Doctors; Some Defect

“Dr. Felix Ramírez in Gambia in 2008.” Source of caption and photo: online version of the WSJ article quoted and cited below.

(p. A1) Felix Ramírez slipped into an Internet cafe in the West African nation of The Gambia, scoured the Web for contact information for U.S. diplomats, then phoned the U.S. embassy in Banjul, the capital.

He told the receptionist he was an American tourist who had lost his passport, and asked to speak to the visa section. As he waited to be connected, he practiced his script: “I am a Cuban doctor looking to go to America. When can we meet?”
Dr. Ramírez says he was told to go to a crowded Banjul supermarket and to look for a blond woman in a green dress–an American consular official. They circled one another a few times, then began to talk.
That furtive meeting in September 2008 began a journey for the 37-year-old surgeon that ended in May 2009 in Miami, where he became a legal refugee with a shot at citizenship.
Dr. Ramírez is part of a wave of Cubans who have defected to the U.S. since 2006 under the little-known Cuban Medical Professional Parole immigration program, which allows Cuban doctors and some other health workers who are serving their government overseas to enter the U.S. immediately as refugees. Data released to The Wall Street Journal under the Freedom of Information Act shows that, through Dec. 16, 1,574 CMPP visas have been issued by U.S. consulates in 65 countries.
Cuba has been sending medical “brigades” to foreign countries since 1973, helping it to win friends abroad, to back “revolutionary” regimes in places like Ethiopia, Angola and Nicaragua, and perhaps most importantly, to earn hard currency. Communist Party newspaper Granma reported in June that Cuba had 37,041 doctors and other health workers in (p. A12) 77 countries. Estimates of what Cuba earns from its medical teams–revenue that Cuba’s central bank counts as “exports of services”–vary widely, running to as much as $8 billion a year. Many Cubans complain that the brigades have undermined Cuba’s ability to maintain a high standard of health care at home.

For the full story, see:
JOEL MILLMAN. “New Prize in Cold War: Cuban Doctors.” The Wall Street Journal (Sat., JANUARY 15, 2011): A1 & A12.

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

Fluorescent Bulbs Burn Out Much Faster than Utility Predicted

(p. A5) When it set up its bulb program in 2006, PG&E Corp. thought its customers would buy 53 million compact fluorescent bulbs by 2008. It allotted $92 million for rebates, the most of any utility in the state. Researchers hired by the California Public Utilities Commission concluded earlier this year that fewer bulbs were sold, fewer were screwed in, and they saved less energy than PG&E anticipated.

As a result of these and other adjustments, energy savings attributed to PG&E were pegged at 451.6 million kilowatt hours by regulators, or 73% less than the 1.7 billion kilowatt hours projected by PG&E for the 2006-2008 program.
One hitch was the compact-fluorescent burnout rate. When PG&E began its 2006-2008 program, it figured the useful life of each bulb would be 9.4 years. Now, with experience, it has cut the estimate to 6.3 years, which limits the energy savings. Field tests show higher burnout rates in certain locations, such as bathrooms and in recessed lighting. Turning them on and off a lot also appears to impair longevity.

For the full story, see:
REBECCA SMITH. “The New Light Bulbs Lose a Little Shine; Compact Fluorescent Lamps Burn Out Faster Than Expected, Limiting Energy Savings in California’s Efficiency Program.” The Wall Street Journal (Weds., JANUARY 19, 2011): A5.

More Economic Freedom in World (But Not in U.S.)

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

(p. A15) Riots in Greece and France! An IMF bailout for Ireland! The Euro under threat! A new government in London! Tea parties in America! Is it the end of capitalism? Many were predicting just that last year.

The 2011 Index of Economic Freedom, released today by the Heritage Foundation and The Wall Street Journal, tells a different story. The Index records countries’ commitment to the free enterprise/capitalist system by measuring 10 categories of economic freedom: fiscal soundness and openness to trade and investment, government size, business and labor regulation, property rights, corruption, monetary stability and financial competition.
The good news this year? One hundred and seventeen countries, mainly developing and emerging market economies, improved their scores, and the average level of economic freedom around the world improved by about a third of a point on the Index’s 0 to 100 scale.
. . .
For the U.S. and the U.K., the Index of Economic Freedom confirms what those countries’ voters already knew, that there is an urgent need for real change. The U.S. dropped to ninth place in the 2011 Index from eighth (its lowest economic freedom score in a decade), and the UK fell all the way to 16th place from 11th.

For the full commentary, see:
TERRY MILLER. “The U.S. Loses Ground on Economic Freedom.” The Wall Street Journal (Weds., JANUARY 12, 2011): A15.
(Note: ellipsis added.)
(Note: the last sentence quoted above is the slightly more informative print version rather than the slightly less informative online version.)

When Yarn Was Scarce There Was Less Incentive to Develop Power Looms

(p. 223) Though power looms had existed, at least in concept, for centuries (under his sketch for one, Leonardo himself wrote, “This is second only to the printing press in importance; no less useful in its practical application; a lucrative, beautiful, and subtle invention”), there was little interest in them so long as virtually all the available yarn could be turned into cloth in cottages. This fact reinforced the weaver’s independence; but it also encouraged another group of innovative types who were getting ready to put spinning itself on an industrial footing.

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

Those Who Paid Attention to Risk, Did Better in Crisis

Source of graph: screen capture from p. 43 of NBER paper referenced below.

At the American Economic Association meetings in Denver from January 6-9, I attended several sessions dealing the causes and cures of the economic crisis of the last few years.
One issue that came up more than once was whether, and to what extent, various decision makers were blameworthy in what happened. Was this a crisis that well-trained, hard-working and prudent managers, regulators and legislators should have seen coming? Or was it a once in 100 year storm that nobody should be expected to have foreseen?
One compelling bit of evidence was presented in a talk on January 8th by Charles Calomiris in which he presented a graph from a 2010 NBER paper by Ellul and Yerramilli. The graph, shown above, indicates that firms that took risk seriously, as proxied by their giving an important pre-crisis role to a Chief Risk Officer (CRO), tended to suffer less downside volatility during the crisis.

Source:

Ellul, Andrew, and Vijay Yerramilli. “Stronger Risk Controls, Lower Risk: Evidence from U.S. Bank Holding Companies.” NBER Working Paper # 16178, July 2010.